CAD Plunges to New Lows as USD Strength Continues
The Canadian dollar has been trading at historic lows against the US dollar, reaching levels not seen since the COVID-19 pandemic and Trump-era tariffs. The CAD has dropped to around 70 cents on the dollar, prompting some investors to reconsider their hedging strategies.
Despite Canada's own economic challenges, including two quarterly GDP contractions, the weakness of the loonie is attributed to the strength of the US dollar under new Federal Reserve Chair Kevin Warsh. Since his confirmation in May 2026, the USD has gained broad support and interest rate expectations have shifted from cutting rates three times this year to no change or even a single 25 basis point hike.
The widening of short-term yield spreads between Canada and the US, where two-year yields are now 1.32%, is also contributing to the CAD's decline against the USD. This trend has significant implications for global markets, impacting everything from gold and crypto to equity markets.