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First off, we've got **interest rates**. Imagine the Bank of Canada (BoC) and the Federal Reserve (the Fed) in the US as the master chefs of their respective economies. They set interest rates, which are essentially the cost of borrowing money. When one country's interest rates are higher than the other's, it can attract foreign investment. Investors chase higher returns, so they buy the currency of the country with the higher rates. This increased demand strengthens that currency. For example, if the BoC raises rates, and the Fed doesn't, the CAD might strengthen against the USD because investors will want to hold CAD to take advantage of the better returns.
