The Canadian dollar strengthened to a one-month high against its U.S. counterpart on Friday as investors globally celebrated Iran’s move to open the Strait of Hormuz.
The loonie was trading 0.2% higher at 1.3675 per U.S. dollar, or 73.13 U.S. cents, after touching its strongest intraday level since March 13 at 1.3650. For the week, the loonie was up 1.2%, marking its biggest weekly advance since January. Iranian Foreign Minister Abbas Araqchi said the Strait of Hormuz was open following a ceasefire agreement in Lebanon, while U.S. President Donald Trump said talks could take place this weekend and he believed a deal to end the Iran war would come “soon”.
The conflict effectively shut the waterway through which a fifth of the world’s oil and liquefied natural gas usually transits.
“The market is acting like it’s woken up from a bad dream,” said Adam Button, chief currency analyst at investingLive.
“You’d imagine coming out of this everyone is going to want to build larger (oil) inventories. That should be a tailwind for the Canadian dollar.”
Canada is a major producer of energy products, including oil.
U.S. crude oil futures settled 11.45% lower at $83.85 a barrel and the U.S. dollar added to its recent declines against a basket of major currencies. Domestic data showed a surprise decline in March housing starts, falling 6% from the previous month.
The Canadian consumer price index report, due on Monday, is expected to show inflation picking up to 2.5% in March from 1.8% in February.
Bank of Canada Governor Tiff Macklem said inflation will rise in the short term and that an uptick in near-term inflation expectations would not worry the central bank.
Investors expect the central bank to raise interest rates once this year, after pricing in as many as three hikes at one point in March.
Canadian bond yields moved lower across the curve, tracking moves in U.S. Treasuries. The 10-year was down 5.5 basis points at 3.448%.