The Canadian dollar rose against its U.S. counterpart on Monday as investors awaited more data on the Bank of Canada’s decision to cut interest rates and after speculators raised their bearish bets on the currency to a record high.
The loonie was trading 0.1% higher at 1.3725 per US dollar, or 72.86 US cents, after trading in a range of 1.3722 to 1.3764.
As of June 11, non-commercial accounts had increased their net short positions in the Canadian dollar to 129,493 contracts from 91,639 the previous week, data from LSEG and the Commodity Futures Trading Commission showed on Friday. …
It was the largest net short position in the currency in data dating back to 1986.
“The increase in short positions in the Canadian dollar is a cyclical trade,” said Adam Button, chief currency analyst at ForexLive. “Global markets are sensing that high interest rates will cause an economic slowdown, especially in Canada due to high leverage and exposure to housing.”
According to analysts, the Canadian economy is especially sensitive to rising borrowing costs due to high household debt and a short mortgage cycle. The typical loan term is five years or less in Canada, compared to 30 in the United States.
The BoC this month became the first G7 central bank to start cutting interest rates. The minutes of the June 5 political decision will be published on Wednesday.
Canadian home sales fell 0.6% in May from April and were down 5.9% year over year, data from the Canadian Real Estate Association showed.
Canadian government bond yields rose across the curve, tracking movements in US Treasuries.
The 10-year bond rose 3.5 basis points to 3.319%, extending its rebound from the four-month low it hit during Friday’s session at 3.260%. (Reporting by Fergal Smith; Editing by Will Dunham)
