The Canadian dollar weakened against the U.S. dollar on Tuesday as investors monitored negotiations between Canada and Washington ahead of potential new tariffs.
The loonie traded 0.2% lower at 1.39 per U.S. dollar, or 71.94 U.S. cents, after reaching its strongest level in more than two months at 1.3842 during Monday’s session.
Canada Seeks Tariff Agreement With U.S.
Prime Minister Mark Carney held discussions with U.S. President Donald Trump on Monday, according to Carney’s office, as Canada works to secure an agreement before new 50% tariffs are scheduled to take effect at midnight on Wednesday.
The proposed U.S. tariffs would impact approximately $20 billion worth of Canadian imports, creating uncertainty for businesses and currency markets.
Strategists at Monex Europe said a lasting agreement could push the USD/CAD exchange rate toward 1.37. However, a further escalation in tensions could send the pair back above 1.40 in the coming days.
Oil Prices and Economic Data Support Canadian Dollar
West Texas Intermediate oil futures rose 0.6% to $85.03 per barrel as declining expectations for a Middle East peace agreement increased concerns over potential energy supply disruptions.
Higher oil prices can support the Canadian dollar because crude oil is one of Canada’s major exports.
Canadian housing data also showed continued improvement, with home sales increasing for a fourth consecutive month in July, rising 0.5% from June. Home prices also moved higher during the period.
Canadian Bond Yields Ease
Canadian bond yields pulled back from recent multi-year highs as investors continued to assess the outcome of tariff negotiations between Canada and the United States.
