The Canadian dollar got a wakeup call and touched a seven-week high on Monday, rising on the back of Ottawa's approval of two major energy takeovers late last week.
"The near-term impact is you have some buying of the Canadian dollar to pay for those deals. The psychological impact is that some traders try to get ahead of the flow so that will add a little bit to the (Canadian dollar) positive flow," said Camilla Sutton, chief currency strategist at Scotiabank.
At the same time, however, the federal government announced measures that will effectively slam the door shut to future investments by state-owned enterprises. The government said those proposals, which seek control of a Canadian oil sands business, will be found to be of "net benefit on an exceptional basis only."
That guidance effectively means that in the long term Canada is unlikely to see propositions from state-owned enterprises in that segment of the energy sector, which would take some of the shine off the Canadian dollar.
"Now the threshold for state-owned enterprises to invest in Canadian companies is much higher. For them to own a Canadian company can be a bit more tricky. So instead of doing full takeovers you'll probably have more joint ventures," said Charles St-Arnaud, economist and currency strategist at Nomura in New York.
But the Canadian dollar will see action in other ways, namely developments in the global economy and monetary policy actions by North American central banks.
Loonie a 'petrocurrency'
The Canadian dollar has been seen as a 'petrocurrency,' which effectively means its moves are closely tied to swings in commodities, particularly oil prices. But Sutton sees that correlation weakening.
Instead, Canada's dollar is increasingly being viewed as a "risk-sensitive" currency, which essentially means the currency ebbs and flows with the mood in the market.
"We're seen as a risk-sensitive currency. So is oil," said Sutton.
"Both oil and (the Canadian dollar) tend to do well in periods of strong global growth. What we've learned in the last few years is that both oil and the Canadian dollar tend to do well when the U.S. dollar is under pressure. Recently it's been under pressure because of aggressive Fed policy."