The Canadian dollar rose slightly against its US counterpart on Monday, as recent pessimism over the outlook for the Middle East war eased, allowing it to recover part of its losses after hitting a two-month low earlier in the session.

The Canadian currency, known as the loonie, was trading up 0.1% at 1.3715 per US dollar, or 72.91 US cents, after touching an intraday low of 1.3754, the weakest level since January 23.

Erik Bregar, Director of FX and Precious Metals Risk Management at Silver Gold Bull, said: Markets have seen significant swings in broader risk sentiment. The Canadian dollar is behaving somewhat more steadily and is not showing the same level of volatility we see in metals, equities, or bonds.

The US dollar, considered a safe-haven asset, weakened against a basket of major currencies, while equities rose after US President Donald Trump announced he would delay strikes on Iranian energy infrastructure following talks described as productive between the two sides.

Oil prices one of Canadas key exports also declined by 10.3% to $88.13 per barrel, easing some concerns that rising inflation could lead to tighter global monetary policy.

Money markets are currently pricing at least two interest rate hikes by the Bank of Canada this year, after expectations had previously leaned toward keeping policy unchanged before the outbreak of the conflict.

Bregar said: The short end of the yield curve is overreacting. I dont think any central bank will respond hastily to price increases lasting only one or two months.

Data from the US Commodity Futures Trading Commission (CFTC) showed that speculators reduced their bullish bets on the Canadian dollar, with net non-commercial long positions falling to 886 contracts as of March 17, compared with 36,159 contracts in the previous week.

Canadian government bond yields declined across the curve, with the two-year yield falling by 14 basis points to 2.927%, after having reached its highest level since November 2024 at 3.212%.