The Canadian dollar weakened to its lowest level since mid-August, trading near C$1.3893 per U.S. dollar on Wednesday, as trade tensions between Ottawa and Washington intensified and U.S. inflation data reinforced expectations of prolonged monetary policy restraint.
Canada’s currency slipped 0.27% to about C$1.3876 by late New York trading, having earlier touched C$1.3836 before paring some losses. The loonie was last valued at roughly 72.07 U.S. cents, extending a four-day decline.
The pullback follows Canada’s announcement of retaliatory tariffs targeting approximately C$27.6 billion worth of U.S. goods, covering more than 700 products. The measures are scheduled to take effect on Sept. 8, matching the scale of U.S. tariffs imposed on Canadian imports at a 50% rate. The dispute escalated after U.S. President Donald Trump stated it was "time to teach Canada you can't do this anymore."
U.S. inflation data released Tuesday added to the pressure. The Federal Reserve’s preferred measure, the core Personal Consumption Expenditures index, held steady at 3.3% year-over-year in July, unchanged from June and above the 3.2% forecast. Headline PCE inflation remained at 3.7%, also exceeding expectations. Monthly changes showed a 0.2% increase for both metrics, keeping price pressures above the Fed’s 2% target and reducing prospects for imminent policy easing.
The loonie’s decline reflects a broader risk-off tone in currency markets, with the Canadian dollar sensitive to both trade policy shifts and global growth concerns. Analysts note that the currency’s recent volatility aligns with shifts in U.S.-Canada trade relations and persistent inflation dynamics that could delay Fed rate cuts.
