The Canadian dollar strengthened on Monday as foreign exchange reserves traders focused on easing concern over failed peace talks between the United States and Iran and on Canadian special elections that could help Prime Minister Mark Carney secure a majority government. The loonie was trading 0. 3% higher at 1. 3795 per U. S. dollar, or 72. 49 U. S. cents, after recovering earlier losses. It touched its strongest intraday level since March 25 at 1. 3791.
Foreign Exchange Reserves and the loonie’s sharp rebound
The move came as the safe-haven U. S. dollar edged lower against a basket of major currencies, while stocks on Wall Street rose. Marc Chandler, chief market strategist at Bannockburn Global Forex LLC, said the main force behind the move was “a broad U. S. dollar pullback after the initial rally. ” He added that “cooler heads are prevailing, ” and said the talk he was hearing suggested contacts between the United States and Iran were continuing.
The market also had one eye on oil. The U. S. price of oil, one of Canada’s major exports, rose 2. 6% to $99. 08 a barrel, though it was still trading well below the day’s highest levels. That mattered for the currency move because traders were weighing risk sentiment, export prices and the broader dollar shift at the same time.
Political risk and market positioning
Three special elections were set to take place on Monday in Ontario and Quebec, including two in districts that have long voted for the governing Liberal Party. Winning just one of those seats would give Carney a majority of seats in the House of Commons, a result Chandler said would mean “greater political stability. ”
There was also evidence that traders had been leaning against the currency before the rebound. Data from the U. S. Commodity Futures Trading Commission showed speculators had raised their bearish bets on the Canadian dollar to the most since December. Non-commercial net-short positions stood at 55, 648 contracts as of April 7, up from 32, 684 in the prior week.
Foreign Exchange Reserves: what traders are watching next
The loonie’s latest rise came as Canadian bond yields edged higher across the curve, with the 10-year up less than 1 basis point at 3. 476%. Oil prices and U. S. -Iran developments remain central to the next move, but the political outcome in Canada could also matter for market calm.
For now, foreign exchange reserves traders are watching whether the current mix of easing geopolitical concern, softer U. S. dollar demand and potential domestic political stability can keep the Canadian dollar near its recent highs. If those forces hold, foreign exchange reserves positioning may continue to reflect a more confident tone around the loonie in the near term.
