Canadian effective exchange rate index

The Canadian dollar's effective exchange rate is projected to reach 103.2 in 2025, representing depreciation of 4.1% from the previous year and marking the weakest level in nearly two decades. This performance reflects substantial currency weakness driven by widening interest rate differentials as the Bank of Canada cut rates more aggressively than the US Federal Reserve, persistent trade policy uncertainty surrounding US tariff threats that undermined confidence in Canadian assets and softening commodity prices that reduced demand for Canada's resource exports. The 2025 index level sits 21.5% below the 2011 historical peak of 131.4 and 18.2% below the 1990 reading of 126.1, illustrating the Canadian dollar's long-term trend toward depreciation against major trading partners.??

However, the Canadian dollar has demonstrated surprising resilience in 2025 compared to dire predictions that characterized market sentiment entering the year. Currency watchers had braced for substantially more pain, with many analysts forecasting the USD/CAD exchange rate would breach 1.50 (equivalent to CERI levels potentially falling below 100) as trade tensions intensified and economic divergence widened. Instead, the loonie has "flipped the script on last year's bearish calls," stabilizing in the 1.40-1.45 USD/CAD range (approximately 103-105 CERI) through most of 2025 despite persistent headwinds.

This relative stability reflects several offsetting factors including stronger-than-expected Canadian economic data that reduced recession fears, US dollar weakness against other major currencies that limited CAD depreciation, and bargain hunting by international investors attracted to undervalued Canadian assets.?

The past five years witnessed significant volatility in the Canadian dollar driven by pandemic disruptions, commodity price swings and divergent monetary policy trajectories. The CERI index held relatively stable at 108.0 in 2020 as initial COVID-19 flight-to-safety dollar strength was offset by aggressive Bank of Canada stimulus that supported the loonie. The currency appreciated 4.6% in 2021 to 113.0 as commodity prices surged and Canadian economic recovery outpaced expectations, then held flat in 2022 at 113.0 as offsetting forces of monetary tightening and strong resource prices balanced.?