By Fergal Smith
TORONTO (Reuters) - The Canadian dollar strengthened to its highest level in nearly four weeks against its U.S. counterpart on Wednesday as a recovery in risk appetite raised pressure on speculators that have raised bearish bets on currency.
The loonie was trading 0.2% higher at 1.3570 to the greenback, or 73.69 U.S. cents, after touching its strongest since March 3 at 1.3560.
"A number of points seem to be coming together to support the Canadian dollar and potentially open the door to a bit more strength," said Shaun Osborne, chief currency strategist at Scotiabank, noting the recovery in risk appetite, a pickup in Canadian oil prices and extreme bearish positioning in the currency.
Data from the U.S. Commodity Futures Trading Commission shows that speculators have raised their bearish bets on the loonie to the most since January 2019.
"The fact that CAD is actually strengthening now, we probably will see a bit more short covering, particularly if we can close quite strongly on the day-to-day and potentially on the week as well," Osborne said.
Equity markets globally rose as worries receded that financial stress could lead to a credit crunch that would be too much for the global economy to handle.
The Bank of Canada is ready to step in with support if the banking system comes under severe strain, but now it is not even close to being worried about the health of the financial system, Deputy Governor Toni Gravelle said.
Meanwhile, Canadian Finance Minister Chrystia Freeland's promise of a fiscally prudent budget in the face of high inflation has disappointed some strategists who had hoped for spending restraint from the Liberal government.
Canadian government bond yields were mixed across the curve. The two-year rose 1.5 basis points to 3.754%, while the 10-year was down nearly 1 basis point at 3.935%.
(Reporting by Fergal Smith; Editing by Sharon Singleton)