Updated June 2025
Figure S1.8 shows the historical U.S. and Canadian dollar exchange rate.
Summary
The U.S. and Canadian dollar exchange rate averaged US$0.73 in 2024, about 1.5% lower than in 2023.
The exchange rate is expected to depreciate to US$0.70 in 2025 due to U.S. tariffs weighing on the demand for the Canadian dollar under the base case forecast. Over the remaining forecast period the exchange rate is projected to gradually increase along with oil prices stabilizing at US$0.78 in 2029 and holding steady afterwards.
In 2024
The Canadian dollar depreciated 1.5% relative to the U.S. dollar, from US$0.74 in 2023 to US$0.73 in 2024. The exchange rate fluctuated around US$0.74 for the first nine months of the year. However, concerns about the weakness in the Canadian economy, monetary policy divergence between Canadian and U.S. interest rates, and U.S. trade policy uncertainty caused it to depreciate to US$0.70 by December.
Forecast for 2025 to 2034
The threat of U.S. tariffs on Canadian goods is expected to depress the Canadian dollar over the first half of 2025 before modestly rising over the latter half of the year. The exchange rate is forecast under the base case to average US$0.70 in 2025 and slowly increase to US$0.78 by 2029 as U.S. trade policy uncertainty eases, Canadian economic growth picks up, and the price of oil rises and then holds steady thereafter.
One-Year Tariff Scenario (Tariff Case)
Under this scenario, Canada does not reach a diplomatic agreement with the U.S., sparking a broad-ranging trade war that starts in the first half of 2025 and lasts 12 months. Consequently, the Canadian dollar depreciates 8.2% relative to the U.S. dollar, averaging US$0.67 in 2025. With the phase out of tariffs and nontariff measures between Canada and the U.S. in 2026, the exchange rate is expected to rebound to US$0.69, slowly increasing to US$0.78 by 2029 and remaining steady thereafter.
