The Canadian dollar strengthened on Wednesday to its most robust position since early June after U.S. officials delayed the imposition of new tariffs on Canadian goods and the U.S. dollar declined against a range of major currencies.
Trading 0.5% higher, the currency stood at 1.3823 per U.S. dollar, equivalent to 72.34 U.S. cents. That level marked the Canadian dollar's strongest showing since June 2.
Late on Tuesday, U.S. President Donald Trump announced a three-day pause on the introduction of 50% tariffs that had been due to take effect on Canadian goods at midnight. The president said the two countries had reached a deal.
Monex Europe strategists said in a note: "A three-day suspension of threatened US tariffs, announced overnight, has offered the loonie a temporary reprieve, though whether this persists will hang on the outcome of negotiations in the coming days."
Broad movement in currency markets accompanied the Canadian dollar's advance. The U.S. dollar weakened against a basket of major currencies as pressure in the U.S. Treasury market eased from recent extremes. Market participants were also awaiting the minutes from the Federal Reserve's latest policy meeting, due later in the day, for further guidance.
Yields on 30-year U.S. Treasuries fell from around their highest level in 19 years after the U.S. Treasury Department said it would double the size of liquidity support buyback operations for longer-dated bonds. That announcement contributed to the drop in long-term yields, which in turn weighed on the greenback.
For now, the combination of a temporary tariff suspension and the reprieve in Treasury market stress has supported the Canadian dollar's move higher. Observers noted, however, that the currency's gains may depend on how negotiations progress over the coming days and any subsequent developments in U.S. policy or bond market dynamics.
Market data referenced: the Canadian dollar traded at 1.3823 per U.S. dollar (72.34 U.S. cents), up 0.5% and at its strongest since June 2. The report also cited a drop in 30-year U.S. Treasury yields following the Treasury Department's decision to increase the scale of buyback operations for longer-dated bonds.