Canadian dollar dips below 70 cents US for first time since March 2020

The Canadian dollar fell below $0.70 US on Tuesday, marking its first drop to this level since March 2020, when the COVID-19 pandemic began, according to data.

This decline follows a turbulent week, starting with Finance Minister Chrystia Freeland’s resignation from Prime Minister Justin Trudeau’s cabinet. Later, the federal government revealed a fall economic update showing a $61.9 billion deficit for the 2023-2024 fiscal year, exceeding its target by over $20 billion.

The loonie’s decrease also occurs amid ongoing economic challenges and the potential threat of a 25 percent tariff on imported goods from U.S. president-elect Donald Trump. His re-election in November further boosted the strength of the U.S. dollar.

“We’re seeing a lot of people converting U.S. dollars into Canadian,” said Rahim Madhavji, president of Knightsbridge Foreign Exchange, a Toronto-based currency exchange company. “People who get paid in U.S. dollars, have inheritances or do business in U.S. dollars — they’re all converting.”

The recent strengthening of the U.S. dollar against other currencies has impacted the Canadian dollar, which has underperformed in recent weeks. Douglas Porter, chief economist at the Bank of Montreal, noted that this decline is largely tied to specific Canadian factors. These include the political uncertainty triggered by Freeland’s departure, as well as the Bank of Canada’s aggressive interest rate cuts and the looming threat of tariffs.

“There aren’t many economies that face tariffs as Canada does, nor many where U.S. trade is as crucial,” said Porter. “I’m not sure what could reverse the trend in the short term. I’m concerned the Canadian dollar might weaken further unless we get some relief from tariff concerns or better economic news.”