The Canadian dollar stabilized against its U.S. counterpart on Monday as bond market enthusiasm over the U.S. Treasury secretary's choice offset falling oil prices and caution ahead of an official's comments of the Bank of Canada.
The loonie was trading almost unchanged at 1.3978 per U.S. dollar, or 71.54 U.S. cents, after moving in a range of 1.3928 to 1.4007. Last week, the currency rose 0.8%, its biggest weekly gain since August.
“There are factors that offset each other,” said Darren Richardson, director of operations at Richardson International Currency Exchange Inc.
U.S. Treasury yields fell sharply and the U.S. dollar recaptured some recent gains against a basket of major currencies as investors bet that the nomination of Scott Bessent as U.S. Treasury secretary would lead to a more moderate fiscal path than what we feared.
The price of oil, one of Canada's main exports, fell 3.2% after several reports emerged indicating that Israel and Lebanon had agreed to terms of a agreement to end the conflict between Israel and Hezbollah.
Bank of Canada Deputy Governor Rhys Mendes is scheduled to speak on monetary policy on Tuesday. This is the last planned intervention by a Bank of Canada official before the Dec. 11 interest rate decision.
“Any information will be dissected by the market,” Richardson said, adding that higher-than-expected Canadian inflation data last week dampened expectations of another significant cut in interest rates. the central bank's share next month.
Nonetheless, speculators increased their bearish bets on the Canadian dollar to their highest level since July, according to data from the U.S. Commodity Futures Trading Commission. As of November 19, net short positions had increased to 183,566 contracts, up from 182,389 the previous week.
Canadian bond yields followed the decline in US Treasury yields. The 10-year rate fell 11.1 basis points to 3.316%.
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