Canadian dollar weakens as trade war spooks investors

Canadian dollar falls 0.4% against the greenback

Bond yields ease across the curve

TORONTO, – The Canadian dollar weakened against the greenback on Thursday as oil prices fell and the latest escalation of the trade war between the United States and other countries, including Canada, weighed on investor sentiment.

The loonie was trading 0.4% lower at 1.4425 per U.S. dollar, or 69.32 U.S. cents, but holding within the 1.4240 to 1.4543 range it has operated in since the beginning of March.

Wall Street extended its recent losses after U.S. President Donald Trump threatened to impose additional tariffs on imports from the European Union.

Trump’s increased tariffs on all U.S. steel and aluminum imports took effect on Wednesday. Reciprocal tariffs are planned for April 2.

“I think we’re in this consolidation until we figure out what is actually going to go on and stick,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada, adding that volatility could pick up once the reciprocal tariffs are implemented.

Canada sends about 75% of its exports to the United States, including oil. U.S. crude futures fell 1.6% to $66.55 a barrel as investors weighed the risk a global trade war could hurt demand.

Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year was down 3 basis points at 3.042%, after earlier touching its highest level since February 24 at 3.136%.

On Wednesday, the Bank of Canada cut its benchmark interest rate by 25 basis points to 2.75% but said it would “proceed carefully with any further changes,” needing to assess both the upward pressures on inflation from higher costs in a trade war and the downward pressures from weaker demand.

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