The Canadian dollar CADUSD steadied against its U.S. counterpart on Wednesday, with the currency unable to sustain a move out of its recent trading range as the Bank of Canada worried about the economic impact of a trade war.
The loonie was trading nearly unchanged at 1.4284 per U.S. dollar, or 70.01 U.S. cents, after touching its strongest intraday level since Dec. 17 at 1.4256.
“We are all sitting on pins and needles at this point and waiting to see what comes at the end of the moratorium on tariffs and to see whether or not the actions taken by Canada to address all the U.S. concerns with respect to the northern border have been enough,” said Bipan Rai, head of ETF and structured solutions strategy at BMO Global Asset Management.
“Until we get there, I suspect the dollar-CAD is going to be in this holding pattern.”
U.S. President Donald Trump has delayed a 25 per cent tariff on goods from Mexico and Canada for a month until March 4 to allow negotiations over steps to secure U.S. borders and halt the flow of the drug fentanyl.
The Trump administration will announce reciprocal tariffs on every country that charges duties on U.S. imports by Thursday, the White House said, a move that will ratchet up fears of a widening global trade war.
The Bank of Canada’s governing council felt that a protracted trade conflict with the U.S. would permanently shrink the level of domestic GDP, the minutes of a policy decision meeting showed.
Canada sends about 75 per cent of its exports to the United States, including oil, which settled 2.7 per cent lower at $71.37 a barrel.
The Canadian 10-year was up 8.3 basis points at 3.181 per cent, tracking moves in U.S. Treasuries after data showed that U.S. consumer prices increased by the most in nearly 1-1/2 years in January.