The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Wednesday as investors pinned hopes on the ceasefire holding in the Middle East and awaited domestic jobs data.
The loonie was trading 0.2% higher at 1.3815 per U.S. dollar, or 72.39 U.S. cents, after touching its strongest intraday level since March 26 at 1.3805. “The tentative ceasefire in Iran provided a lot of confidence in the market and we saw a huge rebound in equities yesterday and that’s helped higher-risk currencies,” said Darren Richardson, chief operating officer at Vantry Capital Inc.
“They are still very tentative gains. If we see a break in the ceasefire, it could see the Canadian dollar weaken again.” The U.S. dollar added to its losses from the previous day against a basket of major currencies. Safe-haven demand had helped boost the U.S. currency in recent weeks. Despite the truce, there were concerns that energy flows through the crucial Strait of Hormuz would remain restricted. The price of oil, one of Canada’s major exports, was up 3.4% at $97.57 a barrel. The Bank of Canada expects the energy price shock caused by the war to push inflation up in the near term, but sees the impact on the economy as uncertain.
Canada’s employment report for March, due on Friday, could offer additional clues on the state of the economy. Economists expect a gain of 15,000 jobs after the economy shed 84,000 in February.
“We will see some impact from employment (data), but the market is still focusing on overall sentiment,” Richardson said.
Canadian bond yields moved lower across the curve, tracking moves in U.S. Treasuries. The 10-year was down two basis points at 3.444%.