Canadian Dollar Reaches One-Month High Amid Confirmation of Strait of Hormuz Reopening

Canadian Dollar Surges to One-Month High Against US Counterpart

The Canadian dollar strengthened to a one-month high against its US counterpart on Friday as investors globally celebrated Iran's move to open the Strait of Hormuz. The loonie was trading 0.2% higher at 1.3675 per US dollar, or 73.13 US cents, after touching its strongest intraday level since March 13 at 1.3650.

This represents the loonie's biggest weekly advance since January, with a gain of 1.2% for the week. The Canadian dollar's rally is largely attributed to the recent conflict in the Middle East, which effectively shut the Strait of Hormuz, a waterway through which a fifth of the world's oil and liquefied natural gas usually transits.

The market's reaction to the news is significant, with oil prices plummeting. U.S. crude oil futures settled 11.45% lower at $83.85 a barrel. Additionally, the US dollar added to its recent declines against a basket of major currencies.

Canada's energy sector is expected to benefit from the increased demand for oil, as the country is a major producer of energy products. This could provide a tailwind for the Canadian dollar, according to Adam Button, chief currency analyst at investingLive.

Domestic data showed a surprise decline in March housing starts, falling 6% from the previous month. The Canadian consumer price index report, due on Monday, is expected to show inflation picking up to 2.5% in March from 1.8% in February.

Bank of Canada Governor Tiff Macklem said inflation will rise in the short term and that an uptick in near-term inflation expectations would not worry the central bank. Investors expect the central bank to raise interest rates once this year, after pricing in as many as three hikes at one point in March.

| Price Movement | Canada | US | | --- | --- | --- | | Canadian Dollar vs US Dollar | 1.3675 (up 0.2%) | | | U.S. Crude Oil Futures | $83.85 (down 11.45%) | | | Canadian Bond Yields (10-year) | 3.448% (down 5.5 basis points) | |

Canadian bond yields moved lower across the curve, tracking moves in US Treasuries.