The Canadian dollar strengthened to a near three-week high against its U.S. counterpart on Monday, as concern eased about failed peace talks between the United States and Iran and ahead of Canadian special elections that could secure a majority government for Prime Minister Mark Carney.
The loonie was trading 0.3% higher at 1.3795 per U.S. dollar, or 72.49 U.S. cents, after clawing back its earlier declines. The currency touched its strongest intraday level since March 25 at 1.3791.
“The biggest driver is a broad (U.S.) dollar pullback after the initial rally,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
“Cooler heads are prevailing. The talk that I’m hearing suggests that contacts between the U.S. and Iran are continuing.”
The deadline passed for the start of a U.S. military blockade of ships leaving Iran’s ports, and Tehran threatened to strike ports of its Gulf neighbors after weekend talks on ending the war broke down.
The U.S. price of oil, one of Canada’s major exports, rose 2.6% to $99.08 a barrel but was trading well below its highest levels of the day. The safe-haven U.S. dollar edged lower against a basket of major currencies and stocks on Wall Street rose.
Speculators have raised their bearish bets on the Canadian dollar to the most since December, data from the U.S. Commodity Futures Trading Commission showed on Friday. Non-commercial net-short positions stood at 55,648 contracts as of April 7, up from 32,684 in the prior week.
Three special elections were set to take place on Monday in Ontario and Quebec, with two in districts that have long voted for the governing Liberal Party. Winning just one of those seats will give Carney a majority of seats in the House of Commons.
“It looks like tomorrow the Liberals will have a majority in parliament,” Chandler said. “It means greater political stability.”
Canadian bond yields edged higher across the curve, with the 10-year up less than 1 basis point at 3.476%.
