The Canadian dollar slipped to its weakest level since mid-August on Wednesday, pressured by escalating U.S.-Canada trade tensions and firmer-than-expected U.S. inflation data.
The U.S. dollar bought C$1.3876 at midday in New York, up 0.27% on the day, after touching an intraday high of C$1.3893 and a low of C$1.3836. The Canadian currency, often called the loonie, last traded at about 72.07 U.S. cents, its lowest since Aug. 19.
Ottawa said it would impose retaliatory tariffs on roughly C$27.6 billion worth of U.S. goods, matching the value of American tariffs on Canadian imports announced earlier this week. The U.S. measures include a 50% tariff on targeted Canadian products, while Canada’s response covers more than 700 items and will take effect Sept. 8.
U.S. inflation data released Wednesday added to the pressure. The core personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, held steady at 3.3% year-over-year, while the broader PCE index rose 3.7%, above the 3.6% forecast. Both measures increased 0.2% month-over-month.
The Fed targets 2% annual inflation. The stronger-than-expected readings reinforced expectations that U.S. interest rates may remain elevated for longer, supporting the dollar against its Canadian peer.
President Donald Trump escalated rhetoric on Wednesday, saying it was "time to teach Canada that it can no longer do this," referring to Canadian countermeasures against U.S. trade policy. The comments followed the announcement of the U.S. tariffs, which were framed as a response to alleged unfair Canadian trade practices.
The loonie’s recent decline comes after a period of relative stability, with the currency trading in a narrow range for much of the summer. Analysts said the latest developments could weigh on Canada’s export outlook and economic growth if trade disputes persist.
