Canadian dollar steadies near 2-week low as tariff deadline draws closer
TORONTO, Feb 26 (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Wednesday, holding near an earlier two-week low, as an approaching deadline for U.S. import tariffs led investors to grow more worried about the prospects of a trade war.
The loonie was trading nearly unchanged at 1.4315 per U.S. dollar, or 69.86 U.S. cents, after touching its weakest intraday level since February 10 at 1.4365.
U.S. President Donald Trump has delayed implementation of a 25% tariff on goods from Mexico and Canada until March 4 to allow negotiations over steps to secure U.S. borders and halt the flow of the drug fentanyl. On Monday, Trump said the tariffs are "on time and on schedule," denting hopes of a further reprieve.
Canada sends about 75% of its exports to the U.S.
"The conclusion from the first delay in tariff implementation was that Trump was only interested in gaining concessions from Canada, and that helped CAD settle into a period of calm," said Kyle Chapman, FX markets analyst at Ballinger & Co in London. "But with Trump's hard stance on the new March deadline, each day closer is seeing markets price that tariff risk premium back in, bit by bit."
The Canadian dollar hit a 22-year low at 1.4793 on February 3, before the tariffs were delayed.
"The market really bought into the narrative that Trump wouldn't go through with a trade war, and obviously that sets USD-CAD up to spike again if they have wrongly called his bluff."
The price of oil, one of Canada's major exports, fell as a surprise build in U.S. fuel stockpiles signalled demand weakness and a potential peace deal between Russia and Ukraine continued to weigh on prices. U.S. crude oil futures were down 0.6% at $68.53 a barrel.
Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up about half a basis point at 3% after earlier touching its lowest level since February 7 at 2.973%.
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