The Canadian dollar (CAD) has gradually appreciated against the US dollar (USD) and the euro in recent weeks. Over the recent period examined (from October 19 to 23) and based on data from the Bank of Canada and its daily exchange rate tool, the Canadian dollar appreciated against the two currencies (+0.74% against the US dollar and +0.91% against the euro). The rate of the US dollar increased from 1.4097 to 1.3993 CAD and that of the euro increased from 1.5810 to 1.5667 CAD. It therefore takes fewer Canadian dollars to buy a greenback and a euro. Over a period of one year (between September 23, 2025 and September 23, 2026), the USD/CAD rate increased from 1.4145 to 1.3993 and the EUR/CAD rate increased from 1.6325 to 1.6059 CAD per euro. This represents a decrease of approximately 1.08% in the USD/CAD rate and 1.63% in the EUR/CAD rate. The Canadian dollar therefore appreciated slightly against the US dollar and the euro over this one-year period. How can we explain this appreciation of the loonie against the greenback and the European currency?
The loonie on the rise: a rebound to put into perspective
The recent rise in the Canadian dollar appears to be the result of a combination of several factors. Indeed, the value of the Canadian dollar depends primarily on demand for Canadian goods and services. The more people want to buy these, the more the loonie gains value. However, this fundamental postulate in economics is only valid if other factors remain constant (ceteris paribus). Furthermore, other factors can cause the price of a currency to move upwards or downwards (monetary policies of central banks, trade balance, inflation rate, geopolitical situation, etc.).
Geopolitical tensions (conflicts in the Middle East, disruptions in the Strait of Hormuz and the Black Sea) have led to a sharp increase in commodity prices in 2026. Being a major exporter of raw materials, Canada is seeing its export revenues increase, which favors the Canadian dollar. Canadian exports increased for a third consecutive quarter mainly due to higher crude oil exports, widening the trade surplus to $4.2 billion. In October, energy prices were among the factors supporting the loonie, according to analyzes by the currency exchange platform MTFX. Certainly, most commodities, especially oil, are denominated in US dollars. However, the virtuous effect on the Canadian dollar is explained above all by the dynamism of the natural resources sector, which contributes significantly to the growth of the national economy.
The monetary policy of the Bank of Canada is also a factor likely to influence the loonie. A possible increase in the key rate, particularly due to persistent inflationary pressures, could support the Canadian dollar by making investments denominated in Canadian dollars more attractive to investors.
This upward dynamic of the Canadian dollar needs to be qualified. Its recent progress remains modest and is caused by exceptional geopolitical tensions which may fade. Moreover, Desjardins, in its currency analysis of October 2, 2026, does not believe that the dollar is entering a new bull market. According to his forecasts, some of the dollar’s recent gains could be reversed if energy markets stabilize or if the American Federal Reserve maintains its interest rates, two scenarios envisaged by Desjardins economists.
Sofiane Idir