The Canadian dollar eased versus the U.S. dollar on Monday as heightened friction between the United States and Iran in the Strait of Hormuz pushed traders toward safe-haven assets.
The currency traded 0.2% lower at 1.3615 per U.S. dollar, equivalent to 73.45 U.S. cents, after moving in a session range between 1.3582 and 1.3619. On Friday the loonie reached an intraday high of 1.3548, its strongest level since March 10.
U.S. military officials said two Navy guided-missile destroyers entered the Gulf to break what they described as an Iranian blockade, and that two U.S. merchant vessels transited the strait. The move followed Iran's statement that it had prevented a U.S. warship from entering the Gulf.
Markets reacted to the developments by favoring the U.S. dollar. The safe-haven currency rose against a basket of major peers as oil prices climbed sharply. Brent futures gained 5.6% to trade above $114 per barrel, while U.S. West Texas Intermediate crude was 3.6% higher at more than $105.
"The trend remains the same this week with negative headlines creating USD strength while positive developments boost the loonie," said Darren Richardson, chief operating officer at Vantry Capital, in a note.
Energy-market moves carry particular weight for Canada because of the country's role as an oil exporter. The Bank of Canada has highlighted that sustained high oil prices could prompt it to deliver consecutive interest rate hikes if those prices begin to push up inflation.
Market participants are positioning for tighter policy from the central bank, with investors leaning toward a Bank of Canada rate increase by July and pricing in at least two hikes in total by the end of 2026.
This reporting focuses on currency and energy-market reactions to geopolitical developments and central bank guidance. It reflects market quotes, official statements and investor pricing expectations as reported.