The Canadian dollar fell about 0.6% against the U.S. dollar on Monday, pulling back from a more than two-month high reached last week as trade tensions between Ottawa and Washington intensified.
The loonie traded at 72.24 U.S. cents, down roughly 0.4% on the day, while the U.S. dollar index rose 0.2% to 98.981. The U.S. dollar was last quoted at C$1.385, according to market data. The euro slipped 0.1% to $1.1665, and the yen weakened 0.1% against the dollar to 159.13.
Gold prices advanced 0.9% to $4,643 an ounce, supported by safe-haven demand amid the escalating trade dispute. The moves followed a weekend of heightened rhetoric between the two North American neighbors.
U.S. President Donald Trump, posting on Truth Social, said Canada would be treated "like a State no longer," escalating threats to impose a 50% tariff on Canadian automobiles, car parts and steel starting January 1, 2027. Canadian Prime Minister Mark Carney, speaking to reporters, described the U.S. actions as an attack, stating, "You're at war when you get attacked. We got attacked."
Ottawa responded by pledging to match U.S. measures dollar-for-dollar, with retaliatory levies targeting U.S. steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics set to take effect on September 8. Affected sectors include winemakers, dairy farmers, furniture manufacturers and hockey equipment suppliers, alongside cross-border supply chain companies listed on the Toronto Stock Exchange and NYSE.
The Canadian economy showed resilience in recent data, with second-quarter GDP expanding at a 3.4% annualized pace and July job gains totaling 75,000. Analysts at City Index noted that the daily Relative Strength Index on USD/CAD had entered oversold territory for the first time since January prior to Monday's bounce, suggesting potential for further volatility.
Karl Schamotta, chief market strategist at Corpay Cross-Border Solutions, told the Financial Post that mid-August strength in the Canadian dollar was largely driven by the U.S. Treasury's bond buyback announcement, underscoring how policy shifts in Washington can rapidly alter currency dynamics.
