Experts predict that the Canadian dollar will continue to struggle through 2025, according to a report from The Canadian Press.
The Canadian dollar, also known as the loonie, is facing a prolonged period of weakness, with experts predicting little improvement until 2025. Despite a slight uptick to 71.18 cents US on Monday, the currency remains near a four-year low and approximately 4% below its September value. Economists point to multiple challenges keeping the loonie subdued.
Katherine Judge, a senior economist at CIBC Capital Markets, anticipates the Canadian dollar will hover around its current level for the rest of the year. “We’ve breached concerning levels,” Judge noted, highlighting the uncertainty facing the loonie in the coming months.
One major factor is the strength of the U.S. dollar, which has surged following Donald Trump’s re-election. His administration’s promise to impose broad tariffs on all U.S. imports adds significant pressure, particularly as Canada sends 75% of its exports to its southern neighbour. If these tariffs are implemented, the loonie could dip further, though there’s hope for a partial recovery next year if Canada can negotiate favourable trade terms.
Another key issue is the growing disparity between Canadian and U.S. interest rates. While Canada’s economy has shown signs of slowing, the U.S. economy has performed more robustly. This has led the Bank of Canada to cut interest rates faster than the U.S. Federal Reserve to stave off a recession. The gap could widen further if Trump’s tariff policies come into play, prompting more aggressive rate cuts in Canada.
The judge expressed concern that tariffs and weaker exports might force the Bank of Canada into a challenging position. “Our exports are deeply tied to integrated supply chains with the U.S.,” she explained. “Tariffs could harm both economies, so there’s room for negotiation. But the uncertainty makes it hard to predict the impact on the loonie.”
While a weaker Canadian dollar benefits exporters by making their goods more competitively priced in the U.S., it comes at a cost. Companies that rely on imports face rising expenses, and Canadians travelling abroad will feel the pinch of higher costs. Additionally, an overly weak loonie risks importing inflation, which could create further economic challenges.
The judge emphasized the delicate balance needed for the Canadian dollar to remain competitive without triggering negative consequences. “A lower loonie can attract investment and create jobs, but if it drops too much, inflation becomes a problem,” she said.
In the short term, Canadians expect ongoing volatility as economic and political uncertainties unfold. For now, the loonie’s slide reflects Canada’s current economic conditions and its deep ties to U.S. policy decisions.
