At 9:26 a.m. ET, the Canadian dollar was trading at $1.3270 to the greenback. (Mark Blinc/Reuter)
The Canadian dollar strengthened slightly on Monday against its U.S. counterpart as an uncertain outlook for U.S. fiscal stimulus weighed broadly on the greenback, offsetting lower prices for oil, one of Canada’s major exports.
The U.S. dollar tumbled as investors worried that U.S. President Donald Trump’s defeat over health care reform foreshadowed difficulties delivering other key campaign promises, in particular tax cuts.
Large tax cuts were “highly dependent on the savings from replacing Obamacare,” said RBC Capital Markets in a research report.
U.S. crude prices were down 1.54 per cent at $47.23 a barrel, pressured by uncertainty over whether an Organization of the Petroleum Exporting Countries-led production cut will be extended beyond June in an effort to counter a glut of crude.
At 9:24 a.m. ET, the Canadian dollar was trading at $1.3364 to the greenback, or 74.83 U.S. cents, stronger than Friday’s close of $1.3380, or 74.74 U.S. cents.
The currency traded in a range of $1.3322 to $1.3365.
An uncertain U.S. policy outlook has contributed to a cautious stance from the Bank of Canada. As recently as January, the central bank said an interest rate cut remained on the table. It last cut in July 2015 to leave its policy rate at 0.50 per cent.
Bank of Canada Governor Stephen Poloz is likely to be asked about the recent better-than-expected economic performance in Canada when he speaks on Tuesday. But tame inflation data on Friday has indicated little pressure for a rate hike.
Speculators turned the most bearish on the Canadian dollar since March 2016, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar positions swung sharply to net short 24,403 contracts as of March 21 from net long 21,458 contracts a week earlier.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries as demand for safe-haven assets rose. The two-year gained 4.5 Canadian cents to yield 0.727 per cent and the 10-year climbed 55 Canadian cents to yield 1.576 per cent.
The 10-year yield touched its lowest intraday since Nov. 30. at 1.570 per cent.