The Canadian dollar seems to be holding steady despite Monday morning’s AI stock crash. The selloff hit AI heavyweights like NVIDIA, which plunged over 10%, along with other tech stocks tanking across the board. This all started after news broke that a Chinese artificial intelligence startup, DeepSeek, developed AI systems comparable to top players like ChatGPT—but at a fraction of the cost.
What’s the catch? DeepSeek doesn’t need expensive chips or billions in infrastructure, shaking up the entire AI spending narrative. Investors are now questioning whether the trillions planned for AI development are even necessary if it can be done for much less.
The result? A massive selloff in AI stocks like NVIDIA and one of the worst days the tech-heavy NASDAQ has seen in years.
How Does This Impact the Canadian Dollar?
When tech stocks crash, investors tend to pull their money out and look for safe places to park it. Traditionally, that “safe haven” has been the US dollar. In the world of foreign exchange (FX), this is what’s known as a “flight to safety.”
Normally, this type of panic-buying for USD puts extra pressure on weaker currencies, and the Canadian dollar has been in a vulnerable spot lately. You’d think this could be the headwind that sends the loonie into a tailspin.
The Loonie Shows Some Backbone
Surprisingly, the Canadian dollar has only dropped modestly—far less than expected—as of Monday afternoon trading. Even more interesting, there’s a bit of a pattern emerging where the loonie digs in its heels when you least expect it.
Last week, the Canadian dollar gained some traction after former President Trump’s inauguration came and went without any tariff announcements. It also strengthened at the end of the week, thanks to weaker-than-expected US business activity data.
What’s Next for the Loonie?
Does this mean the Canadian dollar is about to make a big comeback? Not quite. Scotiabank’s Chief FX Strategist Shaun Osborne put it bluntly: “The CAD will have a hard time gaining significantly on the USD while interest rate differentials remain wide.”
Still, this could mark the start of the US dollar peaking, or at least the loonie finding a more stable bottom. Then again, things could change with the next social media post from President Trump.
The Canadian dollar is currently trading at 1.4400 CAD against the US Dollar.