06:15 AM EDT, 10/31/2024 (MT Newswires) -- The Canadian dollar (CAD or loonie) firmed ever so slightly on Wednesday but continues to flirt with four-year lows, noted Bank of Montreal (BMO).

The bigger picture is that at just under 72 cents (or just above $1.39/US$) it's close to the weakest level in the past 20 years, said the b ank.

The only other episodes when the Canadian currency was notably weaker were during the depths of the COVID-19 disruption in 2020 and at the tail end of the oil price collapse in early 2016.

A broad firming of the US dollar (USD) is playing a role, stated BMO. But so, too, is the very aggressive policy of the Bank of Canada.

With 125 bps of rate cuts under its belt already, and more to come apparently, the BoC is leading the central bank pack on the rate-cut front, added BMO.

It's not helping that Governor Tiff Macklem continues to suggest that the short-term interest rate spread -- now wider than 100 bps -- isn't even close to its limit, according to the bank.

Yet, in fact, the current gap on, say, three-month paper is the widest since 1997, and aside from that episode the bank has never seen Canadian rates this far below their United States counterparts.

Add in some possible market reaction after the US presidential election and the currency could be under pressure for some weeks yet, concluded BMO.