Canadian Dollar Falls Below 70 US Cents for First Time in Nearly 5 Years

Canadian dollar coins are pictured in a file photo. Jonathan Hayward/The Canadian Press

The Canadian dollar dropped below 70 cents U.S. for the first time in about four and a half years and only the fourth time in the past 30 years, after a tumultuous week in politics.

The loonie reached a low of US$0.69 on Dec. 17, according to Bank of Canada data.

The drop came just one day after Liberal MP Chrystia Freeland resigned as finance minister, causing political turmoil for Prime Minister Justin Trudeau.

The government also released its Fall Economic Statement on Dec. 16, with a higher-than-expected deficit of $61.9 billion. Freeland had previously promised to keep that number to $40.1 billion.

“The Canadian dollar has faced a combination of headwinds this year that have driven it to a 4.5 year low,” Ballinger & Co FX market analyst Kyle Chapman told The Epoch Times in an emailed statement.

The foreign exchange risk management firm said inflation “has cooled dramatically and per capita growth has been negative, making the Bank of Canada one of the most dovish developed markets central bank.” The company said “political uncertainty has been added to the mix, too, with the finance minister’s resignation.”

Canada’s economy faces the possibility that President-elect Donald Trump will introduce 25 percent tariffs on Canadian goods heading into the United States, bringing a new level of uncertainty to the dollar, according to ING FX strategist Francesco Pesole.

“The consensus view is that US tariffs would send Canada into recession, and the reaction by an increasingly growth-oriented Bank of Canada could be cutting rates further,” Pescole wrote in a Dec. 18 article.

This is the fourth time in nearly 30 years that the Canadian dollar has dropped below US$0.70. In March 2020, at the start of the COVID-19 pandemic, the dollar dipped around the 70-cent mark. Prior to that, it fell to US$0.68 in January 2016.

The dollar hit an all-time low in January 2002 of US$0.61.

“Sentiment is still pretty negative on the Canadian economy and the macro backdrop,” Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, told Reuters. “Add in the political dysfunction, and that does not look kindly on the Canadian dollar at this point.”

Karl Schamotta, chief market strategist at Corpay, said the political turbulence raises uncertainty for Canadian consumers and businesses.

Canada’s inflation rate dropped slightly in November to 1.9 percent, down from 2 percent the previous month, Statistics Canada reported.