Canada's dollar, known as the loonie, dropped to its lowest since December after the U.S. announced plans to impose tariffs on its Northern neighbors' exports of softwood lumber.
The U.S. dollar was fetching 1.3552 Canadian dollars at 8:47 a.m. HK/SIN, compared with around C$1.3408 just before the announcement.
U.S. Commerce Secretary Wilbur Ross said on Monday that anti-subsidy tariffs averaging around 20 percent would be imposed, affecting $5 billion worth of imports of softwood lumber imports from Canada, Reuters reported.
In total, Canada exported around C$8.6 billion (around $6.37 billion) worth of softwood lumber in 2015, according to Canadian government data, which indicated the country was the world's fourth-largest forest product exporter.
In 2015, the U.S. imported a total of $325.4 billion in goods and services from Canada.
Khoon Goh, senior foreign-exchange strategist at ANZ, said there could be scope for more weakness in the loonie, particularly if it fell below C$1.36 against the dollar.
"It's not just the lumber," he said, noting the U.S. administration had also been rumbling about potential tariffs on dairy products. "Any further escalation of this situation between the U.S. and Canada could well see the Canadian dollar weaken further."
In 2016, Canada exported around C$112.6 million (around $83 million) worth of dairy products to the U.S., while it imported around C$557.3 million worth of dairy products from its Southern neighbor, according to Canadian government data.
Goh noted that the news appeared to have also depressed the Mexican peso. The U.S. dollar was trading under 18.48 pesos before the news broke, but rose as high as 18.8410 pesos afterward.
"It's really the sentiment around it," Goh said, noting that trade concerns had eased after the U.S. declined to label China a currency manipulator earlier this month.
"It appeared the U.S. administration was backing down on earlier trade threats. Suddenly, it's announced [tariffs] on Canadian products. Concerns were raised once again on the potential for trade frictions," he said.
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.