US dollar exchange rate

The USD/CAD exchange rate has fluctuated since the global recession. Initially, the loonie appreciated strongly through 2011, reaching and exceeding parity with the US dollar. While the loonie began trending slightly down in subsequent years, it was propped up by strong commodity prices, particularly crude oil, a sign of the importance of the energy sector in the Canadian economy. However, commodity prices cratered at the end of 2014 through 2016, causing tremendous depreciation of the Canadian dollar; from 2011 through 2016, the Canadian dollar lost 23.7% of its value against the US dollar. Differences in monetary policy in Canada and the United States exacerbated this depreciation, as the lowering of the overnight rate led to money flowing away from Canada and into the United States, contributing to US dollar appreciation.

Since then, the US dollar exchange rate has fluctuated within a narrow band, as both the Bank of Canada and Federal Reserve hiked interest rates in an effort to prevent the economies of Canada and United States, respectively, from expanding too rapidly. This has occurred alongside strong economic performance for both countries, particularly in regard to their labour markets. Then, in late 2018 and in 2019, while both economies have encountered some speed bumps, Canada has faced more significant crosswinds. A decline in oil prices and abated Canadian GDP growth at the end of 2018 has made the United States a more attractive location for funds to flow toward, causing the US dollar to appreciate against the loonie. This trend has continued through 2019 into early 2020 primarily as the US economy has remained strong. This has placed upward pressure on the US dollar, therefore leading the loonie to depreciate further.

The pandemic affected the loonie in 2020. Global travel and economic activity declined, leading to an oversupply of oil and a drop in oil prices. This price drop has meant that Canadian oil exports were relatively less valuable and the demand of US dollars flowing into Canada and conversely Canadian dollars flowing out of Canada was lower. Thus, the US dollar exchange rate fell by 1.0% over 2020, however, this reversed course over 2021 as oil prices rebounded and the Canadian economy began showing promising signs of a faster than expected recover, compared with the US economy.

Over 2022, the US economy caught up in its recovery, and as a result, the loonie is forecast to depreciate. This depreciation in 2022 can also be attributed to the Russian invasion of Ukraine and the resulting increase in commodity prices, which increases demand for Canadian exports and makes the loonie more desirable. After being forecast to rally during 2023, the Canadian dollar stalled and the US dollar exchange rate fell an additional 3.6%. With the US continuing to show signs of economic recovery, the loonie is anticipated to continue depreciating.