06:32 AM EST, 02/14/2025 (MT Newswires) -- The Canadian dollar (CAD or loonie) averaged C$1.439 last month ($0.695), marking the weakest level in more than two

decades -- since April 2003, said Bank of Montreal (BMO).

Although the currency is on track to rebound a bit this month, it remains historically weak, wrote the bank.

This weakness is being prodded by two key factors, stated BMO. First, there's outright US dollar (USD) strength -- again, to a record high in January no less. While the prospect for tariffs has a hand in the USD's strength, it also has a hand, separately, in the loonie's weakness.

That comes as the Bank of Canada is likely to put more weight on the growth impact of U.S. tariffs than on the influence of any retaliatory tariffs on inflation, pointed out BMO.

Meanwhile, there's likely a dash of political uncertainty thrown into the mix, added the bank. After the tariff scare at the start of February, one legacy left by the whipsawing of BMO's Canadian economic forecast was a weaker loonie.

This reflected the now more tangible risk of tariffs. The bank sees the currency staying above C$1.40, on average, for the remainder of the year. However, the Canadian dollar remains sensitive to news from the tariff front.

If Canada ends up with a lighter tariff touch, the loonie could be back below C$1.40 sooner, according to BMO. But if it's a heavier tariff hand, the currency could easily test C$1.50.