Canadian Dollar Gains Strength as Investors Shift Away from U.S. Assets

Toronto – The Canadian dollar rose sharply against the U.S. dollar on Wednesday, as global investors moved away from American financial markets amid escalating trade tensions and despite continued weakness in oil prices ,one of Canada’s key exports.

The loonie climbed 0.7% to 1.4160 per U.S. dollar, or 70.62 U.S. cents, after reaching an intraday high of 1.4133 , its strongest level since Friday.

“For a variety of reasons, investors are pulling out of U.S. financial markets,” said Karl Schamotta, Chief Market Strategist at Corpay, in a market note. “While the U.S. may see a reduction in its trade and financial imbalances, the trade-off could be significantly slower economic growth.”

The U.S. dollar weakened broadly against a basket of major currencies after China announced it would raise tariffs on U.S. goods to 84%, up from a previously announced 34%, effective Thursday.

Meanwhile, U.S. “reciprocal” tariffs ,including a significant 104% duty on Chinese imports, took effect earlier in the day, heightening fears of a prolonged trade war.

Despite market turmoil, yields on U.S. Treasury bonds, traditionally considered a safe-haven investment, climbed, while U.S. equities saw modest gains following several days of losses.

“The Canadian dollar is managing to hold firm amid heightened market volatility and global uncertainty, at least for the moment,” said Shaun Osborne, Chief Currency Strategist at Scotiabank, in a note.

Oil prices continued their downward trajectory, falling 4.4% to $56.93 a barrel, a four-year low, as escalating tariffs reinforced concerns about a global economic slowdown.

In response to global financial instability, Japan and Canada, the current chair of the G7 ,have pledged to collaborate on maintaining stability in global markets, according to a statement from Japan’s Ministry of Finance.

Canadian bond yields edged higher across the curve, though the increase was more modest compared to their U.S. counterparts. The 10-year Canadian government bond yield rose by 1.8 basis points to 3.155%, after earlier peaking at 3.228% , its highest level since February 20.