US dollar exchange rate

Throughout 2025, the Canadian dollar has depreciated amid persistent US tariffs on Canadian goods, diminishing foreign demand for the Loonie and disrupting economic growth. Efforts by the Canadian government to revoke reciprocal tariffs in pursuit of renewed US trust and investor confidence have not alleviated the downward pressure on the exchange rate, which fell 2.0% to $0.71 US dollars per Canadian dollar. Domestically, high youth unemployment—reaching levels recorded prior to the pandemic—has compounded economic headwinds, signaling weak growth prospects and further weighing on the currency's value.

Major volatility has characterized the 2020 to 2025 period, as the Canadian dollar was repeatedly influenced by external shocks and shifting economic fundamentals. Early in the period, the currency rebounded due to rising oil prices and signs of economic recovery following the onset of the COVID-19 pandemic. However, the US economy's faster recovery soon steered sustained depreciation for the loonie, particularly as investors directed funds toward the comparatively stronger US dollar. Short-term boosts from geopolitical events, such as the Russian invasion of Ukraine, drove temporary surges in demand for Canadian energy exports, but these effects proved transitory as global capital flows once again favored the US. Divergent monetary policy responses—while both the Bank of Canada and the US Federal Reserve raised rates to curb inflation—the US dollar remained a more attractive vehicle for global investment, reinforcing the loonie's relative weakness. Ongoing trade tensions and episodic disputes, especially surrounding North American tariffs and negotiations, have created persistent uncertainty, amplifying currency volatility and undermining investor sentiment.

Other macro trends, such as shifts in commodity markets and changes in global capital flows, played a crucial role in shaping the driver over 2020 to 2025. The loonie's value tracked not only the fortunes of Canadian energy exports but also responded sharply to global risk aversion during periods of financial instability, including episodes of elevated inflation and supply chain disruption. Underlying these patterns was the persistent outperformance of the US economy compared to Canada's more moderate expansion, reinforcing the loonie's long-term depreciation trend despite intermittent episodes of strength.