Canadian dollar rises versus US dollar but falters against yen, franc and euro amid market shifts
The Canadian dollar has appreciated against the US dollar but is underperforming compared to traditional safe haven currencies amid global economic uncertainty, according to Financial Post.
Karl Schamotta, chief market strategist at Corpay Currency Research, stated that while the loonie is rallying alongside other major currencies against the greenback due to a retreat from US financial markets, it is weakening in comparison to haven currencies.
As of this month, the Canadian dollar has declined 5.2 percent against the Swiss franc and 2.5 percent against the Japanese yen, while gaining 3.5 percent against the US dollar.
The US dollar index, which tracks the greenback’s value against a basket of currencies including the Canadian dollar, has fallen 8.5 percent this year.
Despite these gains, the Canadian dollar has encountered resistance with other major currency players.
Haven currencies are typically backed by countries with trusted legal systems, robust economies, large net international investment positions, and status as net global lenders.
Schamotta explained that Canada meets the first two criteria—it is a well-regarded and secure place to invest—but is heavily tied to US export demand, frequently runs a trade deficit, and remains a relatively minor net creditor globally.
The tariff measures introduced by US President Donald Trump, beginning with what was labelled as “Liberation Day,” triggered a rush toward shelter currencies.
Kyle Chapman, currency market analyst at Ballinger Group, said the Swiss franc, yen, and euro emerged as the primary beneficiaries of the tariff threats.
He noted that while the Swiss franc and yen are typical havens that benefit in times of volatility, the euro is increasingly viewed as a preferred alternative to the dollar.
Nick Rees, head of macro research at Monex Europe Ltd., highlighted that although the euro is not traditionally seen as a haven, it is currently attracting flows that would normally head to the dollar.
He attributed this trend to the political situation in the US.
The Canadian dollar has fallen 2.6 percent against the euro this month.
Nonetheless, Rees said the loonie is showing strength against a broader range of global currencies, particularly those from Asia and Latin America.
It is performing well against a basket of 21 currencies, including the Polish zloty, South Korean won, Brazilian real, and Colombian peso.
In April, the Canadian dollar rose 5.5 percent against Colombia’s currency.
Rees described this resilience as “unusual,” noting that the Canadian dollar has defied not only risk-related market conditions but also traditional sensitivities to falling oil prices and equity markets.
The S&P/TSX composite index has declined 1.5 percent in April, and the price of West Texas Intermediate crude is down 11 percent.
According to Global News, he linked the Canadian dollar’s broad gains to a reduced risk of new tariffs.
Although Canada still faces 25 percent tariffs on steel, aluminum, and non-US parts of finished vehicles, it has so far avoided reciprocal tariffs.
Rees suggested that Canada may be appealing as a relatively safer North American investment destination compared to the US, as it allows exposure to regional growth while minimizing Trump-specific risks.
He added that the loonie could see further upside if Canada continues to avoid further trade retaliation.
Still, Schamotta warned that the impact of US policies remains difficult to gauge. He said if conditions in the US deteriorate to the point of a global financial crisis, “the greenback will soar against the loonie.”
Reuters reports recent developments have seen the Canadian dollar dip to a six-day low, falling 0.5 percent to 1.3887 per US dollar, amid a strengthening American currency and declining oil prices.
The US dollar appreciated by 0.9 percent against a basket of major currencies, fueled by easing trade tensions and supportive comments from US President Trump, including his backing away from firing the Federal Reserve chief. This helped investor sentiment and spurred a rally on Wall Street.
Meanwhile, oil prices, a key Canadian export, dropped 2.2 percent to $62.27 per barrel, influenced by reports that OPEC+ may consider accelerating oil output increases at its June meeting.
The Canadian political landscape also saw consensus among leading election candidates on energy policy, with both pledging to expedite projects aimed at diversifying oil exports beyond the US.
Consequently, Canadian government bond yields followed the upward trend in US Treasury yields, with the 10-year yield climbing 5.7 basis points to 3.251 percent.
Additionally, Canada recorded a trade deficit of $1.52bn in February, reversing a $3.13bn surplus from January. Exports fell by 5.5 percent to $70.11bn, with notable declines in energy products and motor vehicles.
