The loonie has dwindled over the past year (from early 2024 to now, Q4 2025), crashing for months at a time before staging brief rallies that kept traders guessing. Most of these swings in the CAD’s value are believed to stem from a mix of global political, fiscal, and trade instability (combined with a stronger U.S. dollar), all of which weighed heavily on the currency. Now, in Q4 of 2025, it seems we’ve left those dark times behind. The CAD is once again gaining ground against the greenback. The question on every investor’s, analyst’s, and everyday observer’s mind is simple: what happened over the past year? That’s exactly what this article unpacks. We’ll look at everything from the early stability in 2024 through the turbulence to today’s steady recovery.

Overview of the Canadian Dollar’s Performance from 2024 to 2025

By most metrics, the Canadian dollar had a strong start to 2024, trading at around 74 U.S. cents in the currency markets, meaning 1 USD was selling for about 1.35 CAD. Experts believed there were several factors supporting the value of the CAD, including gradually rising oil prices and the optimistic employment figures coming out of the Canadian economy. By Q2 (2024), after the Bank of Canada announced plans to reduce interest rates, with their stance made known on April 10th and the cut implemented on June 5th (from 5% to 4.75%). This spurred conversations about other possible rate cuts, and that led to currency traders slowly starting to shift toward other major currencies, especially the greenback.

This downward pressure was further compounded by actual subsequent rate cuts by the BoC and tariff threats that dominated Donald Trump’s campaign. Added to this, global market volatility tied to Trump’s victory and universal tariffs (with a proposed 25% tariff on Canadian goods) pushed the commodity-driven CAD well below the 70 U.S. cent mark.

This trend continued into the early months of 2025, as key factors, including market sentiment, tariff fears, and ongoing global volatility, remained in play. But as conditions began to ease, with the Federal Reserve also cutting its own rates (starting from the latter half of 2024) and tariff threats calming down, the CAD started to regain ground against the USD. Adding to this recovery, oil prices held steady and even traded around $72 USD per barrel in June. All these developments helped lift the CAD to a more balanced range of 1.35-1.40 CAD/USD by the end of Q2 2025, a level it has maintained into early Q4.

Global Economic Factors Influencing the Canadian Dollar

The value of the Canadian dollar doesn’t exist in isolation. It moves within a global system shaped by countless external forces. Of course, much of how the CAD performs depends on investor confidence in the Canadian economy itself. And over the last few years, Canada has given investors plenty of reasons for optimism, with a series of strong economic indicators and a national election (in 2025) that added momentum to market sentiment.

However, several key global factors have also played (and continue to play) a major role in influencing the CAD’s performance. Let’s look at the major ones.

1.   U.S. Dollar Strength

The USD/CAD is deeply tied, and that’s no surprise. Especially since the two nations move about $1.3 trillion USD in two-way trade each year, with roughly $3.6 billion USD (2025 figures) crossing the border daily. That level of activity means the strength or weakness of the greenback is, without question, the most influential global factor in where the loonie is headed.

This played out clearly over the past year. When the Bank of Canada cut rates more aggressively than the U.S. Federal Reserve, the greenback instantly became more attractive to traders, sending the CAD lower. But 2025 has been a different ball game, as the USD weakened due to circumstances south of the border, sentiment swung the momentum back. And if you trade currency with any reliable forex trading app, you can see that change in trading volumes where the CAD began regaining ground against the dollar in 2025.

2.   Trade and Tariff Pressures

Threats of U.S. tariffs, renewed trade wars, and protectionist talk rattled markets through late 2024 and early 2025. With the majority of the tariff headlines hitting close to home, all of which affected the loonie.

But as 2025 unfolded, some of that pressure started to ease. Several tariff plans were delayed or watered down, and U.S.-Canada trade discussions began showing signs of cooperation again. Investor confidence followed, helping the CAD claw back some of the ground it lost during months of uncertainty.

The Impact of Commodity Prices on CAD Movements

The loonie is widely known as a commodity-driven currency. Why? Well, its value is tightly linked to how global commodities (especially oil) move. When oil prices rise, the CAD tends to follow; when they fall, the loonie usually feels the hit.

1.   Crude Oil: The Main Driver

Oil is Canada’s single largest export and remains one of the most important factors behind how the loonie performs. And when it is considered that most of Canada’s oil heads straight to the U.S., it’s understandable why any movement in crude oil prices can shift the value of the CAD almost immediately. So:

• When oil prices climb, Canada earns more U.S. dollars from its exports.
• That extra inflow of foreign currency increases demand for Canadian dollars.
• As a result, the CAD strengthens, and the USD/CAD pair tends to move lower.

2.   Other Key Commodities

While oil takes the spotlight, other exports also matter:

• Natural gas, another major energy source, directly impacts Canada’s trade balance.
• Metals and minerals, like gold, copper, nickel, and iron ore, add further weight to Canada’s export value.
• Agricultural goods and timber contribute to steady inflows, especially when global demand rises.

Taken together, these are what creates the commodity backbone that underpins the loonie’s resilience.

Implications for Traders, Investors, and the Canadian Economy

Interestingly, the loonie has kept currency traders on their toes, especially those trading the loonie pair. The mix of policy shifts and global movements has forced them to stay alert, adjusting strategies as the currency evolves in real time.

For investors, a stronger dollar has been a mixed blessing, boosting confidence in Canadian markets but cutting into returns on foreign assets once converted back home.

For the broader economy, a steadier loonie has helped cool inflation and reduce import costs, even as policymakers remain cautious that it doesn’t weigh on exports. Right now, most forecasts place it finishing 2025 around 1.36-1.37 per U.S. dollar, of the resilient nature of the Canadian dollar.

The Loonie’s Road Ahead

After a year of swings, surprises, and slow recoveries, the loonie stands on steadier ground heading into 2026. Its rebound has been real and now built on firmer commodities, calmer trade relations, and renewed market confidence. Still, the path forward depends on how policy, global demand, and U.S. politics unfold. For traders and investors alike, it’s important to note that the Canadian dollar may bend under pressure, but it rarely breaks.