The US and Canadian economies are deeply interconnected. The two countries share the longest undefended border in the world and trade hundreds of billions of dollars worth of goods annually. The auto industry, energy sector, and agricultural trade all depend on this exchange rate.
The Canadian dollar reached parity with the US dollar in 2007 and again in 2011, driven by high oil prices and a strong Canadian economy. Since then, it has traded below parity, typically ranging between 1.25 and 1.40 CAD per USD.
The Bank of Canada and the US Federal Reserve both influence this rate through their respective monetary policies. When one central bank raises rates while the other holds steady, the currency of the rate-hiking country tends to strengthen.