We Like CAD in this Crisis: TD Bank

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TD Bank backs the Canadian dollar as a standout winner amid the escalating Iran crisis.

Canada's TD Bank is backing its domestic currency during the Iran crisis because it is uniquely positioned to benefit from the mix of higher energy prices and global uncertainty.

Unlike a traditional risk-off episode dominated solely by safe havens, analysts say this crisis is rewarding currencies tied to strong terms of trade and energy exposure, placing the loonie alongside the U.S. dollar as a preferred play in the current environment.

In short, the Iran crisis is a shock that favours relatively closed, energy-independent, and geographically insulated economies.

"We like CAD in that environment vs non-USD peers as it has a lower beta to risk-off, oil links and terms of trade boost," says TD. "CAD outperformance underscores that this is not a classic, overwhelming safe‑haven episode."

The Canadian dollar is one of the better performers in G10 following the onset of the Iran crisis that has sent oil and gas prices spiralling and raised concerns for economies that are primarily importers of energy.

"We would favour USD and CAD over G10 peers, see EUR at risk toward 1.10," says TD Securities in an initial FX playbook covering the crisis.

Analysts add that the Canadian dollar is less exposed to any growth slowdown on the other side of the world from an extended conflict, as Canada's economy is mainly exposed to that of the U.S.

Regarding the dollar specifically, analysts say USD upside should persist while risk and uncertainty premia remain elevated.

National Bank of Canada is another domestic bank telling its clients it holds a more constructive view on CAD given ongoing events.

NBC says the Canadian dollar is one of the key currency winners from the Middle East conflict because of a structural energy advantage that could allow it to continue outperforming.

"Among the IMF's main reserve-currency economies, Canada stands out as the country with the largest net energy balance relative to the size of its economy, equivalent to a hefty 4.4% of nominal GDP," says NBC.

Analyst explain that Canada's oil production continues to expand, amplifying the positive impact of higher prices. "Crude oil production is expected to reach 5.8 mb/d in 2026, up 18% from the 4.9 mb/d recorded in 2022."

"We continue to see scope for further CAD appreciation in 2026," says NBC.