Canadian Dollar Reaches 10-Day High Amid U.S. Decline
The Canadian dollar gained ground on Monday, climbing to a 10-day peak as the U.S. dollar faced a significant drop. This shift came after data revealed that speculators were net bullish on the Canadian currency, a first in two-and-a-half years.
Trading was up by 0.8% at $1.3565 (73.72 U.S. cents), with an intraday high of $1.3560—the best level since January 30.
“This volatility finds its footing in strong January labor market figures,” noted Tony Valente, a senior currency dealer at Ascendant FX. Canada unexpectedly saw a loss of 24,800 jobs in January, but all were part-time positions. Nevertheless, the unemployment rate dipped to 6.5%, marking a 16-month low. Analysts believe this data is unlikely to push the Bank of Canada to lower interest rates further.
“A broad-based weakness in the U.S. dollar is also driving this shift, with speculative positions becoming notably bearish against it,” Valente added. The U.S. dollar declined against a range of major currencies following reports that Chinese regulators advised banks to limit their exposure to U.S. Treasuries.
As per U.S. Commodity Futures Trading Commission data from Friday, the Canadian dollar turned net long in speculative positions for the first time since August 2023. Non-commercial net long positions climbed to 2,130 contracts as of February 3, up from a net short position of 16,046 contracts a week prior.
“Gross longs stayed mostly stable, but there was a visible reduction in bearish gross shorts,” commented Sean Osborne, chief currency strategist at Scotiabank. “Typically, significant positioning shifts in CAD have leaned bearish. Yet, various recent reports have indicated a substantial buildup of gross longs since early December.”
On another note, oil prices—key to Canada’s economy—rose by 1.4% to $64.44 per barrel, spurred by renewed fears that tensions between the United States and Iran might disrupt oil supplies.
Meanwhile, Canadian government bond yields slipped slightly, with the 10-year note decreasing by 1.6 basis points to 3.394%.
