The Canadian dollar pulled back from a near one-month high against its U.S. counterpart on Monday but added to recent gains against some other Group of Ten currencies, as a spike in the price of oil, driven by the Middle East war, hit investor sentiment.
The loonie was trading 0.1% lower at 1.3585 per U.S. dollar, or 73.61 U.S. cents, after touching its strongest intraday level since February 11 at 1.3523. Against the euro, the loonie was up 0.2%.
“A lot of people see the strength of the Canadian dollar, its relative performance especially, and they see high oil prices and they link the two,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
“I find that the more sustainable and the more long-term relationship is that when the U.S. dollar is strong, Canada acts like a proxy. That is, when the U.S. dollar is strong, Canada tends to appreciate on the crosses.”
The safe-haven U.S. dollar rose against a basket of major currencies and Wall Street fell on fears a protracted conflict in the Middle East could disrupt global energy supplies and weigh on economic growth.
The U.S. and Canada are major producers of oil, which touched a near four-year high at $119.48 a barrel before giving back some gains.
Canadian trade data for January is due on Thursday and the February employment report is set for the end of the week but their bearing on next week’s Bank of Canada interest rate decision may be limited.
“I’m afraid the war makes all the data outdated,” Chandler said.
Speculators have cut their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. Non-commercial net long positions dipped to 21,050 contracts as of March 3, down from 27,578 in the prior week.
Canadian bond yields were mixed across a flatter curve. The 2-year was up 3.8 basis points at 2.674%, while the 10-year eased 1.5 basis points to 3.399%.
