Canadian Dollar Slips as US Tariffs Counter Oil Price Gains
Canada's dollar fell against the greenback as new US tariffs on Canadian goods offset support from higher oil prices.
The Canadian dollar weakened against its US counterpart on Wednesday, as fresh American import restrictions on Canadian products overshadowed a surge in crude oil prices. The currency, often called the loonie, was trading 0.2% lower at 1.3805 per US dollar, giving back a portion of the gains recorded in the previous session.
The dip came a day after Washington imposed import bans on a range of Canadian goods, including alcoholic beverages, motorcycles, and dairy products. The move followed Canada's own retaliatory tariffs on US goods, which took effect earlier this week. The escalating trade friction has dampened sentiment around the Canadian dollar, according to analysts.
The pressure on the currency persisted even as Brent crude futures breached the $100-per-barrel mark for the first time in over a month. Escalating attacks in the Middle East, including incidents involving tankers, have raised concerns about the stability of oil shipping in the region. Canada, which sends a significant portion of its exports—including oil—to the US, typically benefits from higher crude prices.
Elevated oil costs are also contributing to inflation pressures globally, including in Canada. Market participants have fully priced in a Bank of Canada interest rate hike by December, following recent signals from Governor Tiff Macklem that policymakers are prepared to raise borrowing costs multiple times if inflation remains persistently high.
Investors are now looking ahead to US inflation data due later this week, which could shape expectations for a Federal Reserve rate decision next week. In the bond market, Canadian government yields moved higher across the curve, tracking gains in US Treasuries. The 10-year yield rose 3.8 basis points to 3.849%, its highest level since May 2024.