Canadian Dollar Hits Two-Week High After US–Iran Ceasefire

The Canadian dollar climbed to its highest level in nearly two weeks against its U.S. counterpart on Wednesday, supported by improved investor sentiment following a ceasefire agreement between the United States and Iran.

The easing of geopolitical tensions lifted global risk appetite, sending major indices on Wall Street to their highest levels in about a month. At the same time, oil prices dropped sharply by 16% to $94.85 per barrel, amid expectations that energy supplies could resume through the Strait of Hormuz.

Market analysts said the Canadian currency’s gains reflect broader shifts in investor behavior. Karl Schamotta noted that the loonie is increasingly driven by risk sentiment and borrowing costs, rather than its traditional correlation with oil prices. He added that prospects for renewed capital spending in Canada’s energy sector remain limited.

The Canadian dollar rose 0.3% to 1.3850 against the U.S. dollar, or 72.20 U.S. cents, after touching an intraday high of 1.3825, its strongest level since March 26. Meanwhile, the U.S. dollar weakened broadly against a basket of major currencies, reversing gains fueled in recent weeks by safe-haven demand.

Falling oil prices have also influenced monetary policy expectations. Markets are now pricing in fewer interest rate hikes from the Bank of Canada, with expectations shifting to roughly one increase this year, down from earlier projections of two.

Investors are now awaiting Canada’s March employment report, due Friday, for further clues on the central bank’s policy trajectory. Economists forecast a gain of 15,000 jobs, following a sharp loss of 84,000 in February.

Meanwhile, Canadian government bond yields declined across the curve, tracking movements in U.S. Treasury. The 10-year yield fell by 6.5 basis points to 3.422%, after earlier hitting its lowest level since March 18.