I would recommend filling out the 8938 since your wife is treated as a resident for tax purposes. When you file a joint tax return, the law sees you as one singular "taxpayer," so it is likely that, if challenged, the IRS would argue that the "taxpayer" resides in the US since one of you resides in the US.
There is no tax associated with the reporting on Form 8398, but the penalty for noncompliance is $10,000 per instance. It's better to file the form to avoid a potentially costly mistake. If you were to relocate to Canada, however, you could then safely skip the form in the years when your combined foreign accounts are below that threshold.
While I certainly see how one might make a case for her assets not qualifying when she resides abroad, there isn't anything I can locate in official sources that addresses this situation, so I'd err here on the side of caution.
@jyee315
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