Canadian Dollar Expected to Strengthen Against US Dollar

The Canadian dollar is projected to appreciate against the US dollar until 2025.

Birkellet, the currency director at ATB Capital Markets, suggests that the current situation isn’t about the strength of the Canadian dollar but rather the declining value of the US dollar. He anticipates both currencies will struggle for growth this year, making the US dollar’s challenges more pronounced than those faced by Canadian currency.

In a report, he noted, “The weakness in USD could outweigh the weakness in CAD and set a lower movement in USD/CAD. We expect USD/CAD to drop moderately in the second half of 2025, with a potential low of around 1.3000.”

As of Tuesday, the Canadian dollar (CAD) was slightly weaker against the US dollar, trading at approximately USD 0.7287.

Concerns around US President Donald Trump’s erratic trade policies continue to add to global investor anxieties about inflation and sluggish growth. The unpredictability surrounding tariffs imposed on major economies raises doubts regarding the stability of the US dollar and its status as a global reserve currency.

Kellett remarked that “Dramatic capital turnover from the US is not a sustainable reality, but the US dollar shows signs of long-term systemic weakening.” He believes this trend will persist through 2025, becoming a significant factor in the Forex market.

CIBC economists, Avery Schenfeld and Katherine Judge, share similar viewpoints. They point out that while the Canadian dollar has shown some strengthening recently, it largely reflects a decrease in investor confidence rather than solid Canadian economic foundations.

They mentioned in a recent Forex report that “the market is pricing in a slightly more modest Canadian easing than we expect, and we might be overly optimistic about the Fed’s cuts.” In their view, while there may be pressure on the Canadian dollar in the short term, advancements in trade talks could stabilize USD/CAD around 1.37 until the end of the third quarter.