The Canadian dollar notched its biggest gain in nearly seven weeks against the greenback on Monday, as oil soared and the Federal Reserve's more hawkish guidance supported expectations for Bank of Canada interest rate hikes. Oil, one of Canada's major exports, was boosted by a pause in talks to end U.S. sanctions on Iranian crude. U.S. crude oil futures settled up 2.8% at $73.66 a barrel, while the Canadian dollar was trading 0.9% higher at 1.2357 to the greenback, or 80.93 U.S. cents.
The Canadian dollar weakened to its lowest level in nearly eight weeks against the greenback on Friday and posted its biggest weekly decline since March last year, as the Federal Reserve's more hawkish stance led to short-covering of U.S. dollars. For the week, it was down 2%, after ending lower in the three previous weeks. "We have seen some pretty material short-dollar positions in the market and we have seen traders rushing in to cover those shorts," said Andrew Cherry, head of global markets, HSBC Bank Canada.