How to Short the US Dollar in Canada | 2025
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Updated 25/03/2025
Quick Answer:
Canadians can short the US dollar using ETFs, forex, futures, or CFDs. ETFs are the safest option, while forex and futures offer higher rewards but greater risk. Choose platforms like IBKR, or OANDA based on your strategy and risk tolerance.
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If you have been trading currencies and watching macro trends for years, then you’ve noticed one of the questions that come up the most from fellow Canadian investors is:
“How do I profit when the US dollar drops?”
It’s a smart question—and one that becomes even more relevant when the USD looks overvalued or when the Canadian dollar (CAD) starts gaining strength.
As someone who has actively shorted the USD from Canada, I can tell you: there are a few different ways to do it, ranging from low-risk ETFs to more hands-on strategies like forex, futures, and even CFDs. Each approach has its own pros and cons, depending on your experience level and how much risk you’re willing to take on.
In this guide, I’ll walk you through the most effective and accessible ways for Canadians to short the US dollar, based on my own experiences, along with real-world lessons I’ve learned along the way.
Why Would a Canadian Investor Short the US Dollar?
Shorting the US dollar means betting that it will fall in value—most commonly against our own currency, the Canadian dollar. From my experience, there are three main reasons Canadians might want to short the USD:
1. Interest Rate Differentials
One of the biggest influences on the CAD/USD exchange rate is central bank policy—specifically the Bank of Canada (BoC) versus the US Federal Reserve.
If the BoC raises interest rates while the Fed pauses or cuts rates, the CAD becomes more attractive to global investors, and the USD/CAD pair tends to move lower.
Lesson I’ve Learned: Tracking central bank announcements is crucial. When I anticipated a BoC hike ahead of the market, I positioned short USD—and it paid off.
2. Canada’s Resource-Heavy Economy
If you follow the Canadian dollar closely, you’ve probably noticed how it moves with oil prices. Since Canada is a major energy exporter, a rise in oil prices often means CAD strengthens and USD weakens.
I saw this firsthand in early 2022 when oil prices surged. I shorted USD/CAD and caught a nice move as the loonie gained strength.
My Tip: If you’re thinking about shorting USD, don’t ignore commodities—especially crude oil.
3. Hedging Against USD Exposure
Sometimes shorting the USD isn’t about making a big profit—it’s about protecting your portfolio.
If you hold US stocks or earn income in USD (like I do), a falling dollar can eat into your Canadian buying power. To hedge, I often:
- Use inverse ETFs that rise as the USD falls
- Trade USD/CAD forex pairs strategically
- Adjust my asset allocation to favour Canadian exposure
This kind of strategic hedging is underrated, but in volatile markets, it makes a big difference.
What factors can influence the US Dollar?
The value of the US dollar is driven by a mix of economic and geopolitical forces. Key factors include interest rate policy from the Federal Reserve, inflation and employment data, and the overall strength of the US economy.
In times of global uncertainty, the USD often acts as a safe-haven asset, attracting investors and pushing its value higher. On the flip side, rising oil prices can strengthen the Canadian dollar, weakening the USD/CAD exchange rate. Other long-term influences include growing US debt, fiscal policy, and global moves to diversify away from USD reserves. For Canadian investors, understanding these drivers is essential when deciding if—and when—to short the US dollar.
What Could Weaken the USD?
| Factor | Impact on USD/CAD | Why It Matters to Canadians |
|---|---|---|
| Bank of Canada Rate Hikes | CAD strengthens, USD weakens | Makes Canadian assets more attractive, increasing CAD demand |
| Rising Oil Prices | CAD strengthens | Canada’s oil exports benefit, strengthening CAD |
| US Economic Weakness | USD weakens | Allows Canadians to buy US assets cheaper |
| Global Diversification Away from USD | Long-term USD weakness | Could reshape currency markets, favoring CAD in the long run |
How Does Shorting the USD Actually Work?
Unlike shorting stocks, shorting a currency means selling USD and buying another currency—usually CAD—in the hopes that the USD will decline in value.
Here’s how I typically short the USD:
- Forex Trading: I sell USD/CAD using forex broker’s like OANDA or Interactive Brokers. This is the most direct way to express a bearish USD view.
- Inverse ETFs: Traders can buy ETFs like UDN or SH, which are designed to increase in value as the USD declines.
- Futures Contracts: I trade USD index futures on CME when I want exposure beyond just USD/CAD.
- CFDs: In provinces where it’s allowed, investors can use Contracts for Difference to speculate on short-term USD moves.
Each method comes with different risks and rewards, so it’s important to choose based on your goals, experience, and tolerance for volatility.
Best Ways for Canadians to Short the US Dollar
Let’s break this down by experience level.
1. Beginner-Friendly Options
Inverse ETFs
If you want a hands-off, simple approach, inverse ETFs are a great place to start. I’ve used these in my portfolio during times when I expected broad USD weakness but didn’t want to babysit trades.
Popular choices:
- ProShares Short US Dollar ETF (SH)
- Invesco DB US Dollar Index Bearish Fund (UDN)
- Horizons US Dollar ETF (DLR) – More for currency conversion, but worth knowing
Pros: Easy to buy through Questrade, Wealthsimple, or RBC Direct
Cons: No leverage, slower gains
My Take: These are perfect for passive investors or anyone just getting started with currency speculation.
Forex Trading Without Leverage
If you want more control, you can short USD/CAD and buy CAD using a forex broker.This was my entry point into currency trading.
Pros: No leverage = lower risk; real-time execution
Cons: Requires hands-on management
My Experience: I used this method when I had USD cash sitting in my account and wanted to time the conversion to CAD. It helped me lock in a better rate.
2. Intermediate Strategies
Leveraged Forex Trading
This is where things get interesting—and riskier. Leverage allows you to control a much larger trade size, amplifying both gains and losses.
Most Canadian brokers offer leverage up to 50:1. That means $1,000 in your account can control a $50,000 trade. But be warned: things move fast.
Pros: Potential for high returns
Cons: Leverage can wipe out your account quickly
My Advice: Always use stop-loss orders. One bad trade without a stop-loss can ruin your month.
USD Index Futures
Want to short the US dollar broadly, not just against CAD? Futures contracts on the US Dollar Index (DXY) are your best bet. These trade on the CME and track the USD against a basket of currencies.
Requirements:
- A futures trading account
- Margin capital
- Comfort with advanced trading
Pros: Ideal for macro trades, very liquid
Cons: Complex, high capital requirements, expiry dates
When I Use This: If I believe the USD will fall across the board—not just against CAD—I go for futures.
3. Advanced Techniques
USD/CAD Futures
These are different from DXY index futures—they focus purely on the USD/CAD exchange rate. If you want targeted exposure with serious size, this is the play.
Pros: Precision trading with major upside
Cons: High risk, margin calls, not for the inexperienced
My Rule: Only trade futures when you have a strong conviction and a risk management plan.
CFDs (Contracts for Difference)
CFDs are great for short-term speculation and allow for flexible lot sizes. But here’s the catch: they’re banned in some provinces, including Ontario.
Pros: Low capital requirement, fast execution
Cons: Legal limitations, leverage risk
Pro Tip: If you’re in Ontario, stick with forex or ETFs instead.
ETFs vs. Forex
| Feature | ETFs | Forex Trading |
|---|---|---|
| Leverage | No | Yes, up to 50:1 |
| Ease of Use | Very easy | Requires trading knowledge |
| Risk Level | Low | Medium to High |
| Monitoring Required | Minimal | Active monitoring needed |
| Profit Potential | Limited | High (with risk) |
Best Platforms for Canadians
Having tested several Canadian trading platforms, here are the best options for Canadians based on what you want to trade:
| Platform | Best For | Key Features | Availability |
|---|---|---|---|
| Interactive Brokers | Forex & Futures | Low fees, advanced tools | All provinces |
| CMC Markets | CFDs & Forex | CFD trading (where allowed), flexible options | Limited (no Ontario) |
| OANDA | Beginner Forex | Easy to use, no min deposit, great for first-time FX | All provinces |
Platform Tip: Use OANDA if you’re new, IBKR if you’re experienced, and CMC if you’re in a CFD-eligible province.
Risks of Shorting the USD (And How to Handle Them)
Let’s be real—shorting the USD isn’t a sure thing. Here are the top risks I’ve seen and how to deal with them:
USD Resilience
The US dollar is the world’s reserve currency. Even when things look bearish, the USD can stay stronger than expected.
How to Manage: Don’t overcommit to one trade; diversify.
Leverage Risks
Leverage can magnify both gains and losses.
How to Manage: Use tight stop-loss orders and trade small.
Safe-Haven Surges
In times of crisis, the USD tends to spike due to its safe-haven status.
How to Manage: Hedge with Canadian gold or energy stocks.
Final Thoughts: Should Canadians Short the USD?
Shorting the US dollar can be a smart move—but only if you do it with intention.
If you’re a beginner, stick with ETFs or low-leverage forex. If you’ve got experience and a strong view on macro trends, forex, futures, or CFDs can help you go bigger.
The key is to understand your risk, follow the macro environment, and always use protection (aka stop-losses). I’ve made good money shorting the USD—but only when I had a solid plan.
My advice? Start small, stay curious, and never trade emotionally. The forex market is unforgiving, but with the right strategy, Canadians can absolutely profit from a falling US dollar.
FAQs
Yes! The easiest way to short the USD without leverage is through inverse ETFs like ProShares Short US Dollar ETF (SH) or Invesco DB US Dollar Index Bearish Fund (UDN), which are available on Canadian brokerage platforms like Questrade and Wealthsimple.
For low-risk investors, ETFs are the safest method. They track USD movements passively and don’t require active trading. Forex and futures trading, while potentially more profitable, involve leverage and higher risks.
Canadians can short the USD using:
- Interactive Brokers (IBKR) (forex & futures)
- CMC Markets (CFDs, not available in all provinces)
- OANDA (beginner-friendly forex trading)
The main risks include:
- Unexpected USD strength due to US economic growth or interest rate hikes.
- High leverage risks in forex and futures trading.
- USD demand surges during global crises, which can spike USD value.
Yes! If you hold US stocks or earn in USD, shorting the USD can help protect your purchasing power when the CAD strengthens. Many Canadian investors use ETFs or forex hedging to offset currency fluctuations.
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References:
- Bank of Canada (BoC) – Interest Rate Announcements & CAD/USD Trends
- CME Group – USD/CAD Futures & US Dollar Index (DXY) Contracts
- Horizons ETFs Canada – Currency Hedging & USD/CAD ETFs
- OANDA – Forex Trading & USD/CAD Market Analysis
- Financial Post – Canadian Economic Outlook & USD Trends
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