06:50 AM EDT, 07/11/2025 (MT Newswires) -- The Canadian dollar (CAD or loonie) averaged C$1.367 in June (US$0.731) and has continued to drift stronger so far in July (C$1.364 or US$0.733 through last Wednesday), noted Bank of Montreal (BMO).

When the US dollar (USD) was peaking at its record high in January, the Canadian currency had depreciated to its weakest level in nearly 22 years (C$1.439 or US$0.695), pointed out the bank.

The subsequent broad depreciation of the US dollar has been the loonie's main driver, tempered by more (aggressive than the Federal Reserve) Bank of Canada easing and heightened concern about Canadian economic exposure to U.S. trade policy, said BMO. The latter factor is likely to weigh for a while longer.

However, as the Fed starts (cumulatively) outpacing BoC rate cuts, BMO looks for the loonie appreciation to better match US dollar depreciation.

Meanwhile, Canadian economic prospects are getting a big boost from the unfolding stimulative fiscal policy. The bank look for the Canadian dollar to average C$1.350 (US$0.741) by December 2025 and appreciate further to $1.333 (US$0.752) by the end of next year.