The Canadian dollar closed lower as the U.S. currency strengthened against other currencies and the Conservative government fell, setting the stage for a May election.
The loonie shed early gains to close down 0.58 of a cent to $1.0186 (U.S.).
However, traders don't expect an election to have an effect on the loonie.
For one thing, polls indicate the Conservatives have a very good chance of forming the next government.
Also, the next scheduled announcement on interest rates from the Bank of Canada is April 12 and the central bank wasn't expected to move on raising rates from 1 per cent. The election will likely be settled by the time of the next announcement May 31.
"Election wrangling will not factor into the BoC's decision-making process, but recent events have given the central bank more leeway in deciding when to kick off a hiking campaign," a report from RBC Capital Markets said.
"The Bank of Canada's September 7th meeting is the first one to fully price in a 25 basis point rate hike, though we believe it could and should come earlier."
The loonie has found lift lately from higher oil prices, which are up about 25 per cent since mid-February when a revolt against Libyan leader Moammar Gadhafi gained momentum. On Friday, the May crude contract on the New York Mercantile Exchange was off 20 cents at $105.40 a barrel.
The stronger greenback also helped push the April gold contract on the Nymex down $8.70 to $1,426.20 an ounce.
The May copper contract in New York was unchanged at $4.42 a pound.Report Typo/Error
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