The Canadian dollar (loonie) has reached its highest level since 2025 mainly because the U.S. dollar is weakening, not because Canada’s economy is suddenly booming.
Key reasons behind the shift
1. U.S. dollar is losing confidence
- U.S. President Donald Trump is publicly pressuring the Federal Reserve to cut interest rates
- The U.S. Justice Department’s investigation into Fed Chair Jerome Powell has raised concerns about the Fed’s independence
- Investors dislike political interference in central banks → confidence in the U.S. dollar drops
2. Interest rates are more stable in Canada
- The Bank of Canada held its key rate at 2.25%
- Stable policy makes Canada look more predictable compared to the U.S.
3. Investors are moving money elsewhere
- With uncertainty in the U.S., investors are shifting money into:
- Other currencies (like the Canadian dollar)
- Safe assets such as gold and silver (both at record highs)
4. U.S. tariffs are hurting the U.S. dollar
- Trade wars and tariff threats are slowing U.S. growth
- The U.S. dollar has lost about 10% of its value in the past year
- It’s now at a four-year low
What this means for Canadians
Your money buys more in U.S. dollars
- Travel to the U.S. is slightly cheaper
- Online shopping from U.S. stores costs less
Not all good news
- A stronger loonie can hurt Canadian exporters
- Canada’s economy is still growing slowly due to trade uncertainty
Bottom line
The loonie’s rise isn’t because Canada is surging ahead — it’s because global investors are losing faith in the U.S. dollar, especially as political pressure undermines U.S. economic institutions.