Ontario Teachers’ Pension Plan

(OTPP) cut its exposure to the

U.S. dollar

by 56 per cent in the first half of the year as Canada’s currency surged against the greenback.

The pension said its net exposure to the U.S. dollar was $40.2 billion at the end of June, marking the lowest level since the middle of 2021. That shift coincided with the

Canadian dollar

’s strongest first-half rally versus its U.S. counterpart in nearly a decade, a move driven by a turbulent U.S. trade agenda.

“I think the U.S. dollar this year has been a headwind for all Canadian domiciled investors,” Stephen McLennan, OTPP’s chief investment officer for asset allocation, said in an interview Monday. “We’ve adjusted our expectations not only for this year but for the next several years.”

Canadian pension funds are among the largest holders of U.S. assets in the world, meaning that unfavourable movements in the exchange rate between the loonie and the greenback can hurt investment results. A Canadian fund’s return on American assets is stunted by a weaker U.S. currency, which is why massive investors like OTPP hedge that exposure to soften the potential blow.

The pension’s total foreign currency net exposure dropped to $99.4 billion from $142 billion at the end of 2024, the majority of which was a reduction in its exposure to the U.S. dollar.

In recent months, analysts at firms such as JPMorgan Chase and Co. and TD Securities have flagged the risk that Canadian pensions will raise their hedges against the U.S. dollar, in turn driving a cycle that will further weaken the currency.

“Increased U.S. dollar hedging and potential repatriation pave the path for the dollar to keep moving lower sustainably for the next couple of quarters,” a TD team led by Jayati Bharadwaj said in a June 27 report.

The Canadian dollar rallied more than five per cent against its U.S. counterpart in the first half of 2025, the best start to a year for the loonie since 2016. A Bloomberg gauge of the greenback, meanwhile, fell some nine per cent, battered by the roll-out of United States President Donald Trump’s trade war and concerns over the large scale of government spending plans.

OTPP has been “very thoughtful about the risk we wanted to take through that period,” chief executive Jo Taylor said in an interview. “I guess you’d see it as relative to some of our peers a bit more risk-off in terms of our approach to our different investment choices.”

Bloomberg.com