Canadian dollar exchange rate hits 14-month low

TORONTO, June 23 – The Canadian dollar fell to its lowest level in 14 months against the US dollar on June 23, weighed down by declining oil prices and a flight to safety triggered by a sell-off in technology stocks. The loonie touched as low as 1.4217 per US dollar during trading, its weakest level since April 2025.

By the close of trading on June 23, the Canadian dollar was trading at 1.4214 against the greenback, down approximately 0.4% on the day, equivalent to 70.35 US cents. The loonie has now broken through the 71-cent threshold, hitting a seven-month low. Among major currencies, the Canadian dollar was the worst performer of the day.

Multiple Factors Weighing on the Loonie

The current weakness in the Canadian dollar is the result of several converging factors.

The first is the direct drag from falling oil prices. As Canada’s single largest export commodity, crude oil fell about 0.7% on the day to US$73.71 per barrel. A ceasefire agreement between Israel and Hezbollah in Lebanon eased concerns over supply disruptions in the Middle East, eroding the “war premium” that had been built into oil markets. At the same time, progress in US-Iran peace talks further reduced geopolitical risk premiums.

The second factor is risk aversion driven by the tech-sector sell-off. The Nasdaq and S&P 500 both fell to one-week lows, with semiconductor stocks taking a particularly sharp hit. Investor concerns over the Federal Reserve potentially maintaining a hawkish stance, combined with fears over ballooning debt-financed expansion in the AI sector, fuelled the equity downturn. The turbulence drove capital flows into safe-haven assets such as the US dollar, with the Bloomberg Dollar Spot Index rising 0.4% on the day to its highest level since November last year.

The third factor is the wide macroeconomic and monetary policy gap between the US and Canada. The US economy has shown considerable resilience, while Canada’s economic recovery remains sluggish, with GDP unexpectedly contracting in the first quarter. The Federal Reserve’s benchmark interest rate stands at 3.75%, and policymakers have signalled the potential for further tightening. In contrast, the Bank of Canada has found it difficult to follow suit with rate hikes amid domestic economic weakness. The widening interest rate differential between the two countries has accelerated capital flows into US-dollar-denominated assets.

Higher Inflation Fails to Boost the Loonie

Notably, the latest data from Statistics Canada showed that the headline Consumer Price Index (CPI) accelerated to 3.2% year-over-year in May, exceeding market expectations of 3.0% and up from 2.8% in the previous month – the highest reading in 29 months. Core inflation measures also firmed.

Under traditional logic, higher-than-expected inflation and a rebound in oil prices would have acted as catalysts for a stronger Canadian dollar. However, the loonie only strengthened briefly upon the data release, and the gains were completely erased within an hour. Analysts point out that the traditional link between the Canadian dollar as a “petrocurrency” has broken down – higher energy prices are now viewed as a “stagflation tax” on a Canadian economy already under pressure from US tariffs, rather than a pure improvement in terms of trade. Royal Bank of Canada analysis also noted that core inflation pressures remain contained once volatile energy and food categories are stripped out, suggesting the Bank of Canada may not respond aggressively to the headline inflation data.

Outlook

Amo Sahota, Director at Klarity FX in San Francisco, commented: “The Canadian dollar has been on the defensive for weeks, squeezed by widening rate differentials, slowing growth, trade uncertainty, and asymmetrical responses to geopolitical risks. Today, with tech and chip stocks struggling to sustain their massive valuations, traders are rushing to safe havens, adding fresh pain to an already weak loonie.”

On the technical front, the USD/CAD pair maintains a strong bullish trend on the daily chart, with moving averages forming a typical bullish alignment. Société Générale analysts noted that USD/CAD has broken above a downward trend line that had been in place since last year, signalling a decisive shift in momentum, with upside targets pointing toward the 1.4285–1.4335 range.

Market attention now turns to upcoming Canadian economic data and the Federal Reserve’s policy direction. Analysts believe that as long as the economic divergence between the US and Canada persists, the Canadian dollar will continue to face significant downward pressure in the near term.