TORONTO, March 28 (Reuters) – The Canadian dollar strengthened to a three-week high against its U.S. counterpart on Tuesday as easing of banking sector stress reduced demand for safe-haven assets and investors awaited the presentation of Canada’s budget.

The loonie was trading 0.4% higher at 1.3602 to the greenback, or 73.52 U.S. cents, its strongest level since March 7.

“If there was going to be a broad run on banks it would have happened by now,” said Adam Button, chief currency analyst at ForexLive. “The market is cautiously erasing the bank-driven fears. You see that in CAD, oil.”

Investors had worried that if financial turmoil continued, it could lead to a severe credit crunch, worsening the economic outlook and reducing demand for oil, one of Canada’s major exports.

U.S. crude oil futures settled 0.5% higher at $73.20 a barrel, adding to sharp gains the day before, while the safe-haven U.S. dollar fell against a basket of major currencies as investors’ appetite for riskier currencies increased.

Canadian Finance Minister Chrystia Freeland will present this year’s budget to parliament at around 4 p.m. EDT (2000 GMT). The document will have a major focus on scaling up investment in clean technology and will include investments in healthcare and help for low-income households.

Investors were also awaiting a speech by Bank of Canada Deputy Governor Toni Gravelle on Wednesday. Money markets are betting that the Canadian central bank will shift to cutting interest rates this year after moving to pause its tightening campaign earlier in March.

Canadian government bond yields were higher across a flatter curve, tracking the move in U.S. Treasuries.

The 2-year rose 9 basis points to 3.708%, while the 10-year touched its highest since March 10 at 2.972% before dipping to 2.929%, up 3.6 basis points on the day.

Reporting by Fergal Smith; Editing by Paul Simao and Cynthia Osterman

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