Canadian dollar dipped below 77 cents US today, its lowest level since last July as fears of a trade war cast a gloomy shadow on the Canadian economy’s prospects.
The loonie got as low as 76.92 US in mid-afternoon trading before regaining some lost ground to climb back above the 77-cent mark.
The currency began February above 81 cents US, but has steadily slid lower as protectionist trade talk has begun to overshadow ongoing negotiations between Canada, the U.S. and Mexico to update the 1994 North American Free Trade Agreement.
U.S. President has threatened to tear up the agreement unless a better version can be created, and that prospect has sparked concerns for Canada’s economy, which is heavily dependent on exports to the U.S.
Canada provides more than one-sixth of all the steel that the U.S. imports and almost half the aluminum, and threats that those two commodities would be subject to a tariff have depressed the value of the country’s currency.
The loonie is weakening against a number of currencies, including the Mexican peso and the Japanese yen, but its decline looks even starker because it’s coming at a time when the U.S. dollar is surging in its own right.
The Bank of Canada will meet on Wednesday and announce its latest decision on interest rates, and trading in currency swap contracts imply there’s only a 12 per cent chance of a hike.