TORONTO, March 23 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Monday as recent gloom around prospects for the Middle East war subsided, with the currency recovering from an earlier two-month low.
The loonie was trading 0.1% higher at 1.3715 per U.S. dollar, or 72.91 U.S. cents, after touching its weakest intraday level since January 23 at 1.3754.
"You've seen big swings in broader risk sentiment," said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
"The Canadian dollar is behaving a little more rationally ... It's not showing the same volatility profile of metals, or stocks or bonds."
The safe-haven U.S. dollar (.DXY), fell against a basket of major currencies, and stocks rallied after U.S. President Donald Trump said he would delay striking Iran's energy infrastructure after productive talks between the countries.
The price of oil , one of Canada's major exports, settled 10.3% lower at $88.13 a barrel, easing some concerns that higher inflation could lead to tighter monetary policy globally.
Money markets have priced in at least two rate hikes by the Bank of Canada this year after leaning toward steady policy before the start of the conflict.
"The short end of a lot of bond market curves is overreacting," Bregar said. "I don't think any central bank is going to react impulsively to rising prices for one month or two."
Speculators have cut their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. Non-commercial net-long positions fell to 886 contracts as of March 17, down from 36,159 in the prior week.
Canadian government bond yields fell across a steeper curve. The 2-year was down 14 basis points at 2.927%, after touching its highest level since November 2024 at 3.212%.
Reporting by Fergal Smith Editing by Rod Nickel
