The Canadian dollar is weakening amid a global flight to safety in the U.S. currency.
Traders in options markets are becoming increasingly bearish on the Canadian dollar despite record high commodity prices, surging prices for crude oil, and tighter monetary policy from the Bank of Canada.
The typically positive conditions have not been enough to keep the loonie higher. The Canadian dollar is struggling against most of its international peers as currency traders pile into the U.S. dollar amid the Russian invasion of Ukraine.
The loonie is down 0.9% versus the U.S. dollar year-to-date, mostly trading in a range between 1.2670 and 1.2800 since late January when Bank of Canada officials signaled their intention to start increasing rates as early as today (March 2).
However, while the Canadian currency has underperformed its U.S. counterpart, it has done better than some of its peers, including the British pound. The loonie is up almost 1% versus the pound sterling in 2022.
Still, foreign exchange speculators last week added the most short bets on the Canadian dollar so far this year. Speculators have been short on the loonie since last September, according to data from the Commodity Futures Trading Commission.