The Canadian dollar, known as the loonie after the bird that graces it, got its wings clipped in 2024. Growing domestic political turmoil — Justin Trudeau announced on Monday that he would step down as prime minister and leader of the Liberal party — and the threat of new tariffs from the incoming Trump administration will keep it caged in 2025.
The currency fell almost 8 per cent against the greenback last year and briefly hit a four-year low of C$1.44 last week. Unlike previous bouts of weakness, there was no oil price crash or a global financial crisis to blame. Instead, much of last year’s retreat was down to interest rates. Currency investors go where they can earn a higher rate of interest on their deposits. After five consecutive cuts, the Bank of Canada’s interest rate at present stands at more than 110 basis points below the midpoint of the Federal Reserve’s target range. The gap is much wider since the start of 2024.
