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Jack Mintz: A Sinking Dollar Is Trudeau’s Latest Legacy
The Canadian dollar has played a significant role in past federal elections, and it wouldn’t be a big surprise if it does so again in 2025. The most famous instance was the devaluation of the ‘Diefenbuck.’ With the Canadian economy weakening and the Diefenbaker government fighting over monetary policy with Bank of Canada governor James Coyne, not only did our dollar sink – from parity to 92.5 U.S. cents, where it was fixed in 1962 in an agreement with the IMF – but so did the fortunes of the Diefenbaker government, which eventually lost office in 1963.
After reaching US$1.04 in 1974, the loonie slid to 69.1 cents in 1986, reflecting growing deficits, lower commodity prices, and the threat of Quebec separation. It hit its all-time low of 61.8 U.S. cents in January 2002, the result of weak commodity prices and global uncertainty following the September 2001 attack on the U.S.
After a resource boom and continuing fiscal responsibility brought our dollar back up to parity during the Harper years, it fell to below 80 U.S. cents when commodity prices collapsed after October 2014. Since 2018, it has fluctuated around 75 cents but has trended down once again since early last year. After Chrystia Freeland resigned as finance minister, it dipped below 70 cents, as political turmoil loomed.
Why the Canadian Dollar Weaksens
Commodity prices play a big role: resources account for over half our export earnings. So does political risk. And if real interest rates stay higher in the U.S., investors will prefer American to Canadian bonds. Increased private and public indebtedness to the rest of the world also puts pressure on our dollar as investors become more concerned about our ability to service that debt.
Expect the Canadian Dollar to Weaken Further in 2025
Oil prices are likely to soften due to falling Chinese demand and an oil supply glut. The U.S. Federal Reserve is not expected to cut interest rates as much as the Bank of Canada has felt necessary, given our weaker economy and lower inflation forecasts. And our indebtedness continues to grow – with the IMF expecting Canada’s balance of payments to weaken further even well beyond this year.
Recommended from Editorial:
- Canada Can No Longer Afford a Peace Dividend
- Freeland’s Conversion to Fiscal Sanity Is Too Late
The fate of the Canadian dollar has played a significant role in past federal elections, and it wouldn’t be a big surprise if it does so again in 2025. The most famous instance was the devaluation of the ‘Diefenbuck.’ With the Canadian economy weakening and the Diefenbaker government fighting over monetary policy with Bank of Canada governor James Coyne, not only did our dollar sink – from parity to 92.5 U.S. cents, where it was fixed in 1962 in an agreement with the IMF – but so did the fortunes of the Diefenbaker government, which eventually lost office in 1963.
After reaching US$1.04 in 1974, the loonie slid to 69.1 cents in 1986, reflecting growing deficits, lower commodity prices, and the threat of Quebec separation. It hit its all-time low of 61.8 U.S. cents in January 2002, the result of weak commodity prices and global uncertainty following the September 2001 attack on the U.S.
After a resource boom and continuing fiscal responsibility brought our dollar back up to parity during the Harper years, it fell to below 80 U.S. cents when commodity prices collapsed after October 2014. Since 2018, it has fluctuated around 75 cents but has trended down once again since early last year. After Chrystia Freeland resigned as finance minister, it dipped below 70 cents, as political turmoil loomed.
Why the Canadian Dollar Weaksens
Commodity prices play a big role: resources account for over half our export earnings. So does political risk. And if real interest rates stay higher in the U.S., investors will prefer American to Canadian bonds. Increased private and public indebtedness to the rest of the world also puts pressure on our dollar as investors become more concerned about our ability to service that debt.
Expect the Canadian Dollar to Weaken Further in 2025
Oil prices are likely to soften due to falling Chinese demand and an oil supply glut. The U.S. Federal Reserve is not expected to cut interest rates as much as the Bank of Canada has felt necessary, given our weaker economy and lower inflation forecasts. And our indebtedness continues to grow – with the IMF expecting Canada’s balance of payments to weaken further even well beyond this year.
Recommended from Editorial:
- Canada Can No Longer Afford a Peace Dividend
- Freeland’s Conversion to Fiscal Sanity Is Too Late
The Canadian dollar has played a significant role in past federal elections, and it wouldn’t be a big surprise if it does so again in 2025. The most famous instance was the devaluation of the ‘Diefenbuck.’ With the Canadian economy weakening and the Diefenbaker government fighting over monetary policy with Bank of Canada governor James Coyne, not only did our dollar sink – from parity to 92.5 U.S. cents, where it was fixed in 1962 in an agreement with the IMF – but so did the fortunes of the Diefenbaker government, which eventually lost office in 1963.
After reaching US$1.04 in 1974, the loonie slid to 69.1 cents in 1986, reflecting growing deficits, lower commodity prices, and the threat of Quebec separation. It hit its all-time low of 61.8 U.S. cents in January 2002, the result of weak commodity prices and global uncertainty following the September 2001 attack on the U.S.
After a resource boom and continuing fiscal responsibility brought our dollar back up to parity during the Harper years, it fell to below 80 U.S. cents when commodity prices collapsed after October 2014. Since 2018, it has fluctuated around 75 cents but has trended down once again since early last year. After Chrystia Freeland resigned as finance minister, it dipped below 70 cents, as political turmoil loomed.
Why the Canadian Dollar Weaksens
Commodity prices play a big role: resources account for over half our export earnings. So does political risk. And if real interest rates stay higher in the U.S., investors will prefer American to Canadian bonds. Increased private and public indebtedness to the rest of the world also puts pressure on our dollar as investors become more concerned about our ability to service that debt.
Expect the Canadian Dollar to Weaken Further in 2025
Oil prices are likely to soften due to falling Chinese demand and an oil supply glut. The U.S. Federal Reserve is not expected to cut interest rates as much as the Bank of Canada has felt necessary, given our weaker economy and lower inflation forecasts. And our indebtedness continues to grow – with the IMF expecting Canada’s balance of payments to weaken further even well beyond this year.
Recommended from Editorial:
- Canada Can No Longer Afford a Peace Dividend
- Freeland’s Conversion to Fiscal Sanity Is Too Late
The Canadian dollar has played a significant role in past federal elections, and it wouldn’t be a big surprise if it does so again in 2025. The most famous instance was the devaluation of the ‘Diefenbuck.’ With the Canadian economy weakening and the Diefenbaker government fighting over monetary policy with Bank of Canada governor James Coyne, not only did our dollar sink – from parity to 92.5 U.S. cents, where it was fixed in 1962 in an agreement with the IMF – but so did the fortunes of the Diefenbaker government, which eventually lost office in 1963.
After reaching US$1.04 in 1974, the loonie slid to 69.1 cents in 1986, reflecting growing deficits, lower commodity prices, and the threat of Quebec separation. It hit its all-time low of 61.8 U.S. cents in January 2002, the result of weak commodity prices and global uncertainty following the September 2001 attack on the U.S.
After a resource boom and continuing fiscal responsibility brought our dollar back up to parity during the Harper years, it fell to below 80 U.S. cents when commodity prices collapsed after October 2014. Since 2018, it has fluctuated around 75 cents but has trended down once again since early last year. After Chrystia Freeland resigned as finance minister, it dipped below 70 cents, as political turmoil loomed.
Why the Canadian Dollar Weaksens
Commodity prices play a big role: resources account for over half our export earnings. So does political risk. And if real interest rates stay higher in the U.S., investors will prefer American to Canadian bonds. Increased private and public indebtedness to the rest of the world also puts pressure on our dollar as investors become more concerned about our ability to service that debt.
Expect the Canadian Dollar to Weaken Further in 2025
Oil prices are likely to soften due to falling Chinese demand and an oil supply glut. The U.S. Federal Reserve is not expected to cut interest rates as much as the Bank of Canada has felt necessary, given our weaker economy and lower inflation forecasts. And our indebtedness continues to grow – with the IMF expecting Canada’s balance of payments to weaken further even well beyond this year.
Recommended from Editorial:
- Canada Can No Longer Afford a Peace Dividend
- Freeland’s Conversion to Fiscal Sanity Is Too Late
