TORONTO \u2014 The Canadian dollar is at its lowest level in about 15 months as it finds itself caught between a weak domestic economy and strong demand for the U.S. dollar.<\/p>\n
The loonie was trading at roughly US70 cents on Thursday, after a steady decline since early May when it traded around US74 cents.<\/p>\n
Karl Schamotta, who leads Corpay\u2019s currency research group, says the U.S. dollar has been \u201ccrushing all of its global rivals,\u201d as the AI boom in the U.S. attracts investment, companies turn higher profits and the economy performs better than expected.<\/p>\n
\u201cThe U.S. exceptionalism theme is very, very powerful right now,\u201d Schamotta said.<\/p>\n
\u201cMoney is leaving other countries and flowing into the United States.\u201d<\/p>\n
The robust American economy and persistent inflation has many traders now predicting the U.S. Federal Reserve is in for higher interest rates later this year.<\/p>\n
Last week, the U.S. Federal Reserve maintained its target range for the federal funds rate at 3.50 per cent to 3.75 per cent. That\u2019s more than one percentage point higher than the Bank of Canada\u2019s 2.25 per cent benchmark rate.<\/p>\n
The Bank of Canada is broadly expected to keep its key lending rate steady as domestic growth remains relatively muted.<\/p>\n
\u201cThe difference between interest rates in different countries is arguably the most powerful influence on where exchange rates go,\u201d Schamotta said.<\/p>\n
\u201cWhen investors have a choice of investing in a different country, they\u2019re going to tend to move their money to the country that offers the higher yield.\u201d Uncertainty from tariffs and trade tensions with the U.S. has also dulled Canadian business and consumer sentiment. As a result, businesses are holding back on investments and hiring, while consumer spending has slowed.<\/p>\n
The deadline to formally extend the Canada-U.S.-Mexico trade agreement is fast approaching on July 1. If all three countries don\u2019t agree to renew the deal, it will become subject to review. The trade talks are expected to yield further uncertainty as the Trump administration has historically used tariff threats against trading partners to extract better deal terms for the U.S.<\/p>\n
Schamotta said it\u2019s bound to generate some negative headlines, and prolonged talks could add pressure to the Canadian dollar.<\/p>\n
The trade negotiations and strong U.S. economic data are likely to weaken the Canadian dollar in the next couple of months, said Sarah Ying, executive director of currency at CIBC Capital Markets.<\/p>\n
But she said the hit is expected to be short-lived.<\/p>\n
As Canada\u2019s economy gains momentum later this year and clarity on the trade deal emerges, that could help strengthen the Canadian dollar, Ying said.<\/p>\n
She estimates the loonie could recover to about US73 cents.<\/p>\n
Shaun Osborne, chief currency strategist at Scotiabank, agrees that the currency is in for a lift. He sees the loonie rising to about US75 cents by year\u2019s end.<\/p>\n
Osborne said his prediction is for the U.S. Federal Reserve to cut rates, while the Bank of Canada ups its overnight rate — shrinking the rate differential and boosting the loonie.<\/p>\n
\u201cIf our view is correct and U.S. rates decline, Canadian rates increase, then that spread differential — that yield differential — should decrease and that should pull the Canadian dollar somewhat higher than current levels,\u201d he forecasts.<\/p>\n
But that could change over the next few months, depending on how monetary policies, the economy and trade talks evolve, he added.<\/p>\n
This report by The Canadian Press was first published June 25, 2026.<\/p>\n
Ritika Dubey, The Canadian Press<\/p>\n
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