The loonie closed at its highest level in more than two years as Toronto's main stock index fell after the Bank of Canada raised its interest rate for the second time in less than two months.
Wednesday's surprise hike of the central bank's overnight lending rate to 1% comes less than a week after the latest data for economic growth showed an impressive expansion of 4.5% for Canada in the second quarter.
The loonie soared on the news, jumping more than a cent to over US82¢, up from Tuesday's average price of US80.83¢. The dollar is now up about 3% over the past month and up 14% from its low of roughly US73¢ in April.
It's the first time the loonie has closed above US81¢ since June 26, 2015.
Analysts widely anticipated a second rate hike in the coming months, but the timing of Wednesday's move came sooner than most had predicted — most experts had expected the bank to wait until its next scheduled rate announcement in late October.
On Bay Street, the Toronto Stock Exchange's S&P/TSX composite index turned negative as investors pared gains in a broad-based decline that saw most sectors finish in the red.
The commodity-heavy TSX dropped a moderate 30.32 points to 15,059.83, but it had been positive before the Bank of Canada's 10 a.m. ET rate announcement.
"A stronger loonie for many companies is actually a negative. I think we've seen that play out in the markets today," said Allan Small, a senior investment adviser at Holliswealth.
"Our country is an exporter. We export about 75% or so, maybe a little more, to the United States of what we pull out of the ground or grow here. So a stronger Canadian dollar does not bode well for our companies that export to the U.S. as well as some of our companies that are multinational."
South of the border, U.S. stocks recovered some of the market's hefty losses from the day before after swelling tensions between the United States and North Korea contributed to major sell-offs.
In New York, the Dow Jones industrial average climbed 54.33 points to 21,807.64, the S&P 500 index added 7.69 points to 2,465.54, and the Nasdaq composite index advanced 17.74 to 6,393.31.
Energy companies led gainers on Wall Street, climbing as the October crude contract rose US50¢ to US$49.16 per barrel.
That marks the fourth trading day in a row in which oil prices have bounced back from levels that were depressed in the wake of Hurricane Harvey earlier last week.
Elsewhere in commodities, the December gold contract lost $5.50 at $1,339.00 an ounce, the October natural gas contract gained US3¢ to US$3.00 per mmBTU, and the December copper contract increased US2¢ to US$3.15 a pound.