Dollar Gains Most in Three Weeks Against Loonie While Yen Climbs

  • Canadian currency weakness linked to energy deal, traders say
  • ISM manufacturing index rises for sixth month in seven

The dollar rose at the start of the new trading quarter, posting its biggest gains against Canada’s loonie in three weeks while declining against the euro and yen as traders await key economic data this week to gauge the strength of the U.S. economy.

The greenback rose to a fresh 1.3400 high versus its Canadian counterpart Monday. The yield on the 10-year Treasury dropped as much as six basis points to 2.33 percent. America’s factories continued to expand in March at a robust pace, demonstrating momentum in an industry that struggled for the better part of the last two years, Institute for Supply Management data showed.

  • Price action in Canadian dollar trading suggested commercial order flow was in play, several traders in Toronto said. Loonie traders pointed to a deal announced last week where Calgary-based Cenovus is to buy assets from U.S. based Conoco in a deal valued at about C$18b ($13b); traders suspect that today’s loonie weakness may have been driven by flows related to that transaction, or flows booked in anticipation of such flows. 
  • Elsewhere, trading flows were modest and mostly directionless, traders said, noting that a heavy calendar of event risk is biased toward the latter half of the week with monthly jobs reports in the U.S. and Canada preceded by a potentially highly-charged meeting between China President Xi Jinping and U.S. President Trump.
  • “Firmer interest rates will likely lend the dollar better support in Q2,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., wrote in note.
  • USD/JPY fell to a fresh low for the session at 110.86, tracking the drop in Treasury yields although trading flows were very light, traders in London said. The dollar filled bids and stops ~111.25 in Asian trading and resumed its decline in U.S. hours after a brief bounce.
  • Dollar-yen may find support around the March 30 low at 110.94 or near March lows in the 110.00 area.
  • EUR/USD up 0.2 percent to 1.0668. Traders are weighing the modest dollar drop against risks to the euro from presidential elections in France, where a debate between candidates will take place Tuesday. Candidate Emmanuel Macron cautioned that a win by separatist favoring Marine Le Pen cannot be ruled out. 
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