The Canadian dollar climbed to its strongest level in nearly two weeks against the U.S. dollar on Wednesday, boosted by a ceasefire agreement between the United States and Iran that lifted global investor sentiment.
The currency, often called the “Loonie,” rose 0.3% to 1.3850 CAD per U.S. dollar (72.20 U.S. cents), after briefly touching 1.3825, its strongest intraday level since March 26.
Market Reaction
Wall Street indexes surged to near one-month highs, while oil prices tumbled 16% to $94.85 per barrel, as traders anticipated a resumption of energy supplies through the Strait of Hormuz.
Karl Schamotta, chief market strategist at Corpay, noted: “The Canadian dollar is climbing on an improvement in risk appetite and borrowing costs, reflecting that its long-standing role as a petrocurrency has eroded markedly in recent years. Prospects for renewed capital expenditure in the Canadian energy sector remain dim.”
Bonds and Monetary Policy
The pullback in oil prices reduced expectations for tighter monetary policy from the Bank of Canada, with markets now pricing in roughly one rate hike this year, down from two expected previously.
Canadian bond yields fell across the curve, tracking U.S. Treasury moves. The 10-year yield dropped 6.5 basis points to 3.422%, after earlier touching its lowest level since March 18 at 3.385%.
Investors are also watching Canada’s March employment report, due Friday, for further clues on the central bank’s policy outlook. Economists forecast a modest 15,000-job gain following February’s sharp loss of 84,000 positions.
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