The Canadian dollar CADUSD edged higher against its U.S. counterpart on Monday, clawing back some of this month’s decline, as oil prices rose and equity markets globally calmed after a volatile start to the year.
Stocks staged a modest rebound as traders put aside concerns about inflation and the crisis in Ukraine to dip back in, but global equities are still headed for their worst January since 2016.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to moves in risk appetite.
Oil rose as a supply shortage and political tensions put prices on track for their biggest monthly gain in almost a year. U.S. crude prices were up 0.7 per cent at $87.38 a barrel.
The Canadian dollar was trading 0.2 per cent higher at 1.2738 to the greenback, or 78.51 U.S. cents, after trading in a range of 1.2721 to 1.2777.
Since the start of January, the loonie has weakened 0.8 per cent as the prospect of faster interest rate hikes by the Federal Reserve bolstered the greenback against a basket of major currencies.
Still, speculators have raised their bullish bets on the Canadian dollar to the highest since July last year, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Jan. 25, net long positions had increased to 12,317 contracts from 7,492 in the prior week.
Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers will appear on Wednesday before the Senate banking committee. Last Wednesday, the central bank left its benchmark interest rate on hold at a record low of 0.25 per cent but signaled that hikes are coming.
Canada’s jobs report for January, due on Friday, could provide further clues on the outlook for interest rates.
The Canadian 10-year yield was up 2 basis points at 1.779 per cent.
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