Canadian dollar dips below 70 cents US for first time since March 2020

The Canadian dollar dipped below $0.70 US on Tuesday, the first time it has done so since the onset of the COVID-19 pandemic in March 2020, according to Bloomberg data.

The dollar's move follows a chaotic start to the week in which Finance Minister Chrystia Freeland announced her resignation from Prime Minister Justin Trudeau's cabinet.

The federal government later unveiled a fall economic update that revealed a $61.9 billion deficit for the 2023-2024 fiscal year, blowing its deficit target by more than $20 billion.

More broadly, the loonie's decline is set against the backdrop of a weakened economy still facing the threat of a 25 per cent tariff on imported goods by U.S. president-elect Donald Trump. His November re-election further strengthened the U.S. dollar.

"Our phones are kind of ringing off the hook right now. We're getting a lot of U.S. dollar sellers," said Rahim Madhavji, the president of Knightsbridge Foreign Exchange, a currency exchange company based in Toronto.

"People that either get paid in U.S. dollars, have inheritance in U.S. dollars, do business in U.S. dollars — and whether they've parked investments and things like that — they're all converting to Canadian," he said.

The greenback has been strong against most currencies lately — but in recent weeks the loonie's performance against it "has become a bit more Canadian-specific," said Douglas Porter, chief economist at the Bank of Montreal.

While some of this is tied to the political uncertainty inflamed by Freeland's sudden departure from cabinet, it also has to do with the Bank of Canada's aggressive campaign to cut interest rates and the threat of tariffs, he noted.

"There are not many economies that have been threatened with tariffs and there are not many economies that U.S. trade is as important to as it is for Canada," Porter said.

"I'm not quite sure what can turn around the currency in the next little while. I actually am [concerned] that it is going a bit weaker yet until we get some relief on the tariff front or some better economic news to help support the currency."