Canadian dollar hits seven-week high on U.S. elections result

The Canadian dollar strengthened to a seven-week ​high against its US counterpart on Wednesday ‌as Canada’s trade surplus widened and after a sweeping victory by Democrats in the US midterm elections led to broad-based declines in the ⁠greenback.

The ​loonie was trading 0.3% higher at 1.3965 per US dollar, or 71.61 US cents, after touching its strongest intraday level since September 16 at 1.3930.

Democrats and Republicans squared up ​for what could be two years of ‌deadlock in Washington, with resurgent Democrats vowing to use their resounding midterm elections victory to rein in President Donald Trump.

“USD-CAD sold off in conjunction with broader-based USD weakness in response to the US election results last ‌night,” said ​George Davis, chief technical ‌strategist at RBC Capital Markets.

“With the Democrats taking control of ​both the House (of Representatives) and Senate, it may ⁠create some impediments for Trump’s trade and military agenda, ⁠along with a curb on reducing regulation of certain industries such as ​tech,” Davis said. “This, in turn, may reduce demand for US assets.”

Dominic LeBlanc, Canada’s minister in charge of US trade ties, said the US midterm results would not change Ottawa’s stance toward trade talks with the US, ⁠adding he would speak soon with his American counterparts.

Canada posted a trade surplus of C$5.35 billion ($3.83 billion) in September, the highest since May 2022, but the data was less upbeat after excluding gold and energy, and export volumes were down 4%.

Separate data showed that Canada’s services ​economy contracted for a fifth straight month in October as trade uncertainty ⁠and rising prices weighed on activity.

The price of oil, one of Canada’s ‌major exports, tumbled as investors awaited Washington’s next move in the US-Israeli war ​with Iran. US crude futures were down 8.5% at $87.89 a barrel.

Canadian bond yields moved lower across a flatter curve, tracking moves in US Treasuries. The 10-year was down 7 ​basis points at 3.712%, its lowest level since August 28.