TORONTO — The Canadian dollar is at its lowest level in about 15 months as it finds itself caught between a weak domestic economy and strong demand for the U.S. dollar.

The loonie was trading at roughly 70 cents US on Thursday, after a steady decline since early May when it traded 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 investment, companies turn higher profits and the economy performs better than expected.

“The U.S. exceptionalism theme is very, very powerful right now,” Schamotta said.

“Money is leaving other countries and flowing into the United States.”

The robust American economy and persistent inflation has many traders now predicting the U.S. Federal Reserve is in for higher interest rates later this year.

Last week, the U.S. Federal Reserve maintained its target range for the federal funds rate at 3.50 per cent to 3.75 per cent. That’s more than one percentage point higher than the Bank of Canada’s 2.25 per cent benchmark rate.

The Bank of Canada is broadly expected to keep its key lending rate steady as domestic growth remains relatively muted.

“The difference between interest rates in different countries is arguably the most powerful influence on where exchange rates go,” Schamotta said.

“When investors have a choice of investing in a different country, they’re going to tend to move their money to the country that offers the higher yield.”

Uncertainty from tariffs and trade tensions with the U.S. has also dulled Canadian business and consumer sentiment. As a result, businesses are holding back on investments and hiring, while consumer spending has slowed.

The deadline to formally extend the Canada-U.S.-Mexico trade agreement is fast approaching on July 1. If all three countries don’t agree to renew the deal, it will become subject to review. The trade talks are expected to yield further uncertainty as the Trump administration has historically used tariff threats against trading partners to extract better deal terms for the U.S.

Schamotta said it’s bound to generate some negative headlines, and prolonged talks could add pressure to the Canadian dollar.

The trade negotiations and strong U.S. economic data are likely to weaken the Canadian dollar in the next couple of months, said Sarah Ying, executive director of currency at CIBC Capital Markets.

But she said the hit is expected to be short-lived.

As Canada’s economy gains momentum later this year and clarity on the trade deal emerges, that could help strengthen the Canadian dollar, Ying said.

She estimates the loonie could recover to about 73 cents US.

Shaun Osborne, chief currency strategist at Scotiabank, agrees that the currency is in for a lift. He sees the loonie rising to about 75 cents US by year’s end.

Osborne said his prediction is for the U.S. Federal Reserve to cut rates, while the Bank of Canada ups its overnight rate — shrinking the rate differential and boosting the loonie.

“If our view is correct and U.S. rates decline, Canadian rates increase, then that spread differential — that yield differential — should decrease and that should pull the Canadian dollar somewhat higher than current levels,” he forecasts.

But that could change over the next few months, depending on how monetary policies, the economy and trade talks evolve, he added.

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

Ritika Dubey, The Canadian Press