Canada is increasingly convinced that U.S. President Donald Trump will soon announce that the United States intends to pull out of the North American Free Trade Agreement, two government sources said. This was followed by Mexico and Canada, with a value of $6.6 and $4.9 billion, respectively.
The Loonie closed at an average trading price of 80.03 cents United States, down 0.27 of a USA cent. They also express doubt whether the U.S. Congress would approve such a move.
The sixth round of negotiations is set to take place from 23-28 January 2018, in Montreal, Canada.
Canada is still optimistic there could still be some sort of positive resolution to these fractious trade talks, the sources said, and will continue to pursue its aggressive outreach plans in the USA, which include meetings with US state governors and lawmakers in Washington.
The U.S. dollar was up 0.9% against the Canadian dollar to 1.2593, on track for its biggest daily gain since October. In the past month or two, the second official said, Canada has begun to consider it somewhat more likely that Trump could trigger the withdrawal.
Reports of NAFTA's possible demise, meanwhile, sent the Canadian and Mexican currencies tumbling, and the U.S. dollar rising from Can$1.2432 at 1200 GMT to Can$1.2554 at around 2030 GMT. The yield on 10-year debt was down six basis points to 2.14 percent, with the rate on similar-maturity U.S. Treasuries little changed.
The source said Canadian ministers felt a withdrawal could be created to show Trump's base that he was keeping his promises and also to put pressure on the negotiators.
The Canadian dollar and the Toronto stock index fell on the news.
A withdrawal notice doesn't mean Nafta would be killed - a country can give notice and then not actually leave.