Canadian dollar gains as Trump travel curb pressures greenback

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday, recovering from an earlier nearly one-week low, as uncertainty triggered by a travel curb ordered by U.S. President Donald Trump pressured the greenback.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

Gains for the Canadian dollar came even as prices of oil, one of Canada's major exports, fell. U.S. crude oil futures CLc1 settled 54 cents lower at $52.63 a barrel after another increase in U.S. drilling activity spread concern over rising output. [O/R]

“It is an unusual risk aversion trade to see the Canadian dollar strengthening in a day when oil and stocks are down and that speaks to the fresh uncertainty in the United States,” said Adam Button, currency analyst at ForexLive.

“The market is seeing signs that (U.S.) policy making will be haphazard and quickly rolled out and poorly thought out.”

The U.S. dollar fell more than 1 percent against the Japanese yen JPY= following a weekend of negative headlines relating to Trump's executive orders on immigration.

The market braced for Canada’s gross domestic product data for November and a speech by Bank of Canada Governor Stephen Poloz on Tuesday.

Earlier this month, Poloz said a rate cut remained “on the table” if the risks facing the country are realized, warning there would be “material consequences” if Trump enacts protectionist policies.

There is a risk that the central bank governor comes across as more optimistic due to the strength of recent domestic data and the expected tailwind of fiscal stimulus, Button said.

The Canadian dollar CAD=D4 ended at C$1.3120 to the greenback, or 76.22 U.S. cents, stronger than Friday's close of C$1.3138, or 76.12 U.S. cents.

The currency’s strongest level of the session was C$1.3076, while its weakest was C$1.3168.

Speculators turned bullish on the Canadian dollar for the first time since September, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar positions swung to net long 2,519 contracts as of Jan. 24 from net short 5,456 contracts a week earlier.

Canadian government bond prices were mixed across the yield curve, with the two-year CA2YT=RR up 2 Canadian cents to yield 0.795 percent and the 10-year CA10YT=RR declining 9 Canadian cents to yield 1.787 percent.

A French-Canadian university student was the sole suspect in a shooting at a Quebec City mosque that killed six people and injured 17 others, Canadian authorities said, in what Prime Minister Justin Trudeau called “a terrorist attack.”

Reporting by Fergal Smith; Editing by Bernadette Baum and James Dalgleish