Canadian dollar gains for fourth day as Wall Street rebounds

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to a 10-day high against its U.S. counterpart on Monday as risk appetite improved and after domestic data showed new home prices stabilizing in March.

The loonie was 0.4% higher at 1.3695 to the U.S. dollar, or 73.02 U.S. cents, adding to its winning streak since Wednesday and trading at its strongest level since April 12.

"It's no surprise to see the Canadian dollar strengthening on a day with equities broadly higher," said Adam Button, chief currency analyst at ForexLive.

U.S. stocks rose after steep losses in the previous session as easing Middle East tensions buoyed risk appetite. Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to shifts in investor sentiment.

U.S. crude oil futures were down 0.5% at $82.72 a barrel, while Canada's new home price index was flat in March compared to February. The Canadian housing market has showed signs of revival in recent months after it was buffeted by elevated borrowing costs in 2023.

"Coming into the year, a big fear in the Canadian dollar market was a hard landing in the housing market," Button said. "It's now clear that home prices have stabilized at worst and may be turning up again."

Still, speculators have raised their bearish bets on the Canadian dollar to the highest level since June 2017, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of April 16, net short positions had increased to 82,815 contracts from 53,385 in the prior week.

Canadian government bond yields edged higher across the curve. The 10-year was up 2 basis points at 3.760%, but stopping short of the five-month high it touched last Tuesday at 3.810%.

(Reporting by Fergal Smith; Editing by Andrea Ricci)