Canadian Dollar Hits 2.5-Month High on US Tariff Delay and Softer Greenback

The Canadian dollar surged to its strongest level against the U.S. dollar in two-and-a-half months on Wednesday, driven by a U.S. decision to suspend new tariffs on Canadian goods and a broader softening of the greenback.

The currency, often called the loonie, appreciated 0.5% to 1.3823 per U.S. dollar, or 72.34 U.S. cents, a level not seen since June 2, according to market data.

Tariff Reprieve Boosts Loonie

A key catalyst for the Canadian dollar's strength was the announcement late Tuesday by U.S. President Donald Trump that a planned 50% tariff on Canadian goods would be suspended for three days. The new duties were originally set to take effect at midnight.

The move provided immediate relief to the currency, though its longer-term impact remains uncertain. "The U.S. announcement to suspend the threatened tariffs for three days has granted the loonie a temporary respite," strategists at Monex Europe noted in a report. They added that whether this trend continues "will depend on how negotiations fare in the coming days."

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Broader Dollar Weakness Provides Tailwinds

The Canadian dollar also benefited from a general decline in the U.S. dollar against a basket of major currencies. The greenback's weakness was linked to an easing of selling pressure in the U.S. Treasury market, where the 30-year bond yield retreated from a nearly 19-year high.

This pullback in yields followed an announcement from the U.S. Treasury Department that it would double the size of its long-term bond liquidity support repo operations. Investors are now awaiting the release of the Federal Reserve's latest policy meeting minutes for further guidance on the central bank's interest rate path.