The Canadian dollar eased against the U.S. dollar on Monday after data indicated a marked rise in speculative short positions on the loonie.
Trading at 1.4210 per U.S. dollar, the currency moved 0.1% lower from prior levels, equal to 70.37 U.S. cents. During the session the exchange rate fluctuated between 1.4176 and 1.4217. The loonie had earlier touched a 14-month low of 1.4248 last Wednesday.
Figures released by the U.S. Commodity Futures Trading Commission on Friday showed a jump in non-commercial net short positions in the Canadian dollar. As of June 23, these net short contracts totaled 146,792, up from 132,901 the previous week. That level of bearish exposure exceeded the net short positions recorded in the yen.
Market participants are also watching domestic economic data and central bank activity for further directional cues. Canadian gross domestic product for April is scheduled for release on Tuesday and is expected to show 0.4% month-over-month expansion. Analysts say the GDP release could affect expectations about the Bank of Canada policy outlook.
Bank of Canada Governor Tiff Macklem is due to take part on Wednesday in a panel at a European Central Bank forum that focuses on central banking. His remarks will be monitored for any signals on the bank's stance.
Strategists at Monex Europe noted in a client note that the Bank of Canada currently stands on hold at a policy rate of 2.25%. With the BoC viewed as more patient compared with a hawkish Federal Reserve, the loonie is likely to be chiefly responsive to movements in oil prices and to shifts in risk sentiment.
Oil, a key export for Canada, was trading higher on Monday, up 2.3% at $70.79 a barrel. The rise followed attacks involving the U.S. and Iran, which underlined the fragility of their interim peace deal; however, cautious hopes for a continued recovery in energy shipping through the Strait of Hormuz limited the extent of price gains.
In sum, the Canadian dollar's recent decline reflects a mix of increased speculative shorting, impending macroeconomic data that could shape central bank expectations, and sensitivity to oil market developments.