Canadian Dollar Trims Yearly Gains

2025-12-31 15:57 By Felipe Alarcon 1 min. read

The Canadian dollar weakened past 1.37 per US dollar, easing from its strongest level since July, as softer domestic growth signals, falling Canadian bond yields, and deteriorating terms of trade eroded Canada’s relative yield and income support, while a firmer US dollar into year end pulled capital back toward US assets.

Statistics Canada reported a 0.3% contraction in real GDP in October, confirming that growth momentum cooled into Q4 and weakening the case for Canadian policy outperformance versus the US.

Canada’s commodity terms of trade have also softened as crude benchmarks declined materially through the year, trimming export receipts and FX inflows.

At the same time, Canadian 10-year yields eased into the low-3% range while US yields remained closer to the low-4% area, widening the carry gap and favoring dollar-denominated assets.

The move is an unwinding part of the roughly 4.8% appreciation accumulated earlier in the year.



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