Market News

By Fergal Smith

• Canadian dollar falls 0.5% against the greenback
• Touches its weakest since April 2020 at 1.4177
• Trump vows 25% tariff on imports from Canada
• Canada-U.S. 10-year spread widens 7.5 basis points

TORONTO, Nov 26 (Reuters) - The Canadian dollar clawed back some of its decline against its U.S. counterpart on Tuesday as investors weighed the likelihood of hefty trade tariffs pledged by U.S. President-elect Donald Trump on Canadian products being implemented.

The loonie was trading 0.5% lower at 1.4060 per U.S. dollar, or 71.12 U.S. cents, after tumbling to its weakest intraday level since April 2020 at 1.4177.
Trump on Monday said he would impose a 25% tariff on imports from Canada and Mexico until they clamped down on drugs, particularly fentanyl, and migrants crossing the border.

"Markets are digesting the news of a 25% tariff with skepticism," Royce Mendes, managing director and head of macro strategy at Desjardins, said in a note.
The Canadian dollar's depreciation is notable but "doesn't seem to reflect a high conviction in these harsher-than-anticipated tariffs being implemented," Mendes said, adding that the threat could nonetheless weigh on business investment in Canada.

Bank of Canada Deputy Governor Rhys Mendes said that if Trump follows through on his threat it would have an impact on both economies and the central bank would incorporate those into its economic forecasts.
Investors expect the BoC to ease its benchmark interest rate by quarter a percentage point at its next policy decision on Dec. 11, with the market pricing in a roughly 20% chance of a larger move. The policy rate is at 3.75%.

The price of oil , one of Canada's major exports, rose 0.7% to $69.41 a barrel as investors eyed OPEC+ discussions on output. Canadian government bond yields moved lower across the curve. The 10-year was down 2.9 basis points at 3.282%, while the gap between it and the U.S. equivalent widened by 7.5 basis points to roughly 103 basis points in favor of the U.S. note.

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Reporting by Fergal Smith; Editing by Will Dunham