TORONTO, May 7 (Reuters) - The Canadian dollar is expected to give back some recent gains against its U.S. counterpart in the coming months, but could resume its uptrend if economic uncertainty linked to the Middle East war and U.S. tariffs eases, according to a Reuters poll.
A median forecast of 27 foreign exchange analysts in the May 1-6 poll put the Canadian dollar down 0.3% at 1.3667 per U.S. dollar, or 73.17 U.S. cents, in three months - slightly stronger than the 1.37 level forecast in a survey last month.
In 12 months, the loonie is seen up 1.5% at 1.3433, compared with 1.3500 in the previous forecast.
"We have already seen a substantial repricing of risk, with geopolitical premiums going away, but ongoing uncertainty surrounding the U.S.-Iran conflict suggests the pair may remain range-bound in the near term," said Sarah Ying, head of foreign exchange strategy at CIBC Capital Markets.
Iran said on Wednesday it was reviewing a new U.S. proposal, after sources said Washington and Tehran were closing in on a one-page memorandum to end the war in the Gulf, while leaving contentious issues such as Iran's nuclear programme for later.
"Improving risk conditions, an erosion in (U.S.) dollar haven demand, and a terms-of-trade tailwind from persistently higher oil prices are all factors that favour USD-CAD downside," said Nick Rees, head of macro research at Monex Europe.
Oil, which has surged since the closure of the Strait of Hormuz, is a major Canadian export.
The Bank of Canada has said that if oil prices stay high and begin pushing up inflation, it may need to respond with consecutive interest-rate hikes. Investors expect two increases this year, swap market data show. However, a majority of economists surveyed by Reuters late last month said borrowing costs would remain unchanged this year.
"Granted, markets may have to navigate CUSMA negotiations first, but assuming no significant surprises, we would expect the loonie to make gains against the dollar into the back end of the year," Rees said.
The Canada-United States-Mexico Agreement, a continental trade pact, also known as USMCA, has shielded much of Canada's exports from U.S. tariffs. It is due for review by a July 1 deadline.
(Other stories from the May Reuters foreign exchange poll)
Reporting by Fergal Smith. Polling by Aman Kumar Soni. Editing by Mark Potter
