Updated March 2017
The Canadian dollar lost ground against the U.S. dollar in 2016. The strength of the U.S. dollar, partially due the Federal Reserve rate hike on December 14, 2016, combined with the Bank of Canada’s low interest rate policy, resulted in the Canadian dollar’s depreciation relative to the U.S. dollar. As shown in Figure 1.8 [Tableau], the U.S./Canadian dollar exchange rate averaged US$0.75 in 2016, compared with US$0.78 in 2015. In 2017, the exchange rate is forecast to weaken, averaging US$0.73, due to soft oil prices and the diverging monetary policies of the United States and Canada. Longer term, the exchange rate is forecast to slowly increase to US$0.80 in 2021 based on higher crude oil prices and monetary policy convergence, resulting in a flat forecast for the rest of the forecast period (2022 to 2026).
