A Reuters image of a Canadian dollar note illustrates the article.
The Canadian dollar remained stable against its U.S. counterpart on Monday, influenced by contrasting factors in global markets. A rally in the bond market, fuelled by optimism over the choice of a new U.S. Treasury secretary, balanced the negative impact of declining oil prices and caution surrounding an upcoming speech by a Bank of Canada official.
The loonie traded nearly unchanged at 1.3978 per U.S. dollar, or 71.54 U.S. cents, after fluctuating between 1.3928 and 1.4007 earlier in the session. This followed a notable 0.8% weekly gain last week, marking its strongest performance since August.
Darren Richardson, Chief Operating Officer at Richardson International Currency Exchange Inc., noted that "various factors are offsetting each other," creating a stable trading environment for the Canadian dollar.
On the U.S. side, Treasury yields experienced a sharp decline, and the dollar eased from recent highs against other major currencies. Investors welcomed the nomination of Scott Bessent as U.S. Treasury Secretary, expecting his leadership to steer the country toward a less aggressive fiscal trajectory.
However, oil prices, a key driver for the Canadian economy, dropped by 3.2%. The decline followed reports that Israel and Lebanon had reached terms to end the Israel-Hezbollah conflict, easing concerns over potential disruptions to global energy supplies.
Adding to the market's cautious tone, Bank of Canada Deputy Governor Rhys Mendes is set to discuss monetary policy on Tuesday. His remarks will be the last significant communication from the central bank before its December 11 interest rate decision. Market participants closely watch for insights, especially after hotter-than-expected inflation data previous week tempered hopes for an aggressive rate cut next month.
Meanwhile, speculators have increased their bearish positions on the Canadian dollar, marking the highest level of short bets since July. Data from the U.S. Commodity Futures Trading Commission revealed a rise in net short positions to 183,566 contracts as of November 19, up slightly from the previous week’s 182,389.
Canadian bond yields also mirrored movements in the U.S. bond market, with the 10-year yield dropping by 11.1 basis points to 3.316%.
