TORONTO, March 27 (Reuters) – The Canadian dollar strengthened against its U.S. counterpart on Monday, notching up its biggest advance in two weeks, as signs of easing stress in the banking sector contributed to a surge in oil prices.

The Canadian dollar was trading 0.7% higher at 1.3655 to the greenback, or 73.23 U.S. cents, its biggest gain since March 13. It moved in a range of 1.3653 to 1.3745.

“We are seeing a recovery in sentiment but also in terms of some of the fundamentals that would support the Canadian dollar,” said Eric Theoret, a global macro strategist at Manulife Investment Management. “The turn in the price of crude has really been a positive for the Canadian dollar.”

Wall Street equities gained and U.S. Treasury yields rose as investor concerns about the financial system were calmed after First Citizens BancShares (FCNCA.O) said it would take on the deposits and loans of failed Silicon Valley Bank (SIVB.O).

Investors had worried that stress in the banking sector could lead to a credit crunch, worsening the economic growth and slowing demand for oil, one of Canada’s major exports.

U.S. crude oil futures settled 5.1% higher at $72.18 a barrel on hopes that banking sector issues would be contained and after Iraq was forced to halt some crude exports from its semi-autonomous Kurdistan region.

Canada’s budget is due on Tuesday. It will introduce a system to lock in future carbon credit prices, a move meant to boost investments by giving businesses certainty to develop low-carbon technologies, a senior government source with knowledge of the document told Reuters.

Canadian government bond yields were sharply higher across the curve, tracking the move in U.S. Treasuries. The 2-year rose 20.5 basis points to 3.632%, after touching on Friday its lowest intraday level since August 2022 at 3.254%.

Reporting by Fergal Smith; Editing by Andrea Ricci and Alison Williams

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