Loonie caught between slow domestic economy and stronger U.S. dollar

Loonies with the the effigy of King Charles on them are struck at an event celebrating the first coin struck at the Royal Canadian Mint in Winnipeg on Tuesday, November 14, 2023. THE CANADIAN PRESS/John Woods

TORONTO — The Canadian dollar has steadily fallen over the past several weeks to trade around the 70 cents US mark as it finds itself caught between a weak domestic economy and strong demand for the U.S. dollar.

As of early May, the loonie was trading around 74 cents US.

Karl Schamotta, who leads Corpay’s currency research group, says the U.S. dollar has been “crushing all of its global rivals,” as the AI boom in the U.S. attracts more investment, companies turn higher profits and the economy performs better than expected.

Meanwhile, Schamotta says the Bank of Canada is broadly expected to keep interest rates steady for the remainder of the year, while investors have been forecasting possible hikes from the U.S. Federal Reserve.

He says the interest rate differential between the two countries is drawing capital out of Canada and toward the U.S., pushing the loonie down against the greenback.

Shaun Osborne, chief currency strategist at Scotiabank, says he sees the loonie rebounding to about 75 cents US later this year, based on his own expectations that the U.S. Federal Reserve cuts rates this year, while the Bank of Canada ups its overnight rate — shrinking the rate differential.

This report by The Canadian Press was first published June 25, 2026.

Ritika Dubey, The Canadian Press