* Canadian dollar gains 0.1% against the greenback

* Touches its weakest since January 23 at 1.3754

* Price of oil settles 10.3% lower

* 2-year yield falls 14 basis points

By Fergal Smith

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 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%.