The Canadian dollar (CAD) is forecast to see strong declines against the US dollar in 2015 while losses against the euro, pound sterling and other majors are possible.

The prediction, made by exchange rate analysts at BMO Capital, comes at a time when the CAD finds itself vulnerable to decreasing oil prices.

In their January update analysts at the Canadian bank have had to hike their USD/CAD forecasts to reflect softer commodity prices and the impressive USD appreciation.

Before we look at the themes driving the Canadian currency here are the rates at the time of this article's latest update:

The British pound to Canadian dollar exchange rate (GBP/CAD) is at 1.8222. The euro to Canadian dollar exchange rate (EUR/CAD) is at 1.3969.The US Dollar to Canadian dollar exchange rate (USD/CAD) is at 1.2070.NOTE: The above quotes are taken from the global FX spot market. It must be noted that your bank will widen the spread on the above numbers when passing on their retail rate to customers. An independent FX provider will however guarantee to undercut the bank's offer thus delivering you more forex. Please see more on this here.

The Canadian Dollar: Key Themes at Play

USDCAD is trending higher as the ‘big dollar’ steamrolls commodities and currencies alikeBMO's model’s ‘fair value’ in USDCAD is similarly trending higherDon't miss your ideal rate and don't get bitten by adverse market moves, find out how.

Forecasting a Continued USD Recovery

BMO Capital’s FX Strategists Greg Anderson and Stephen Gallo tell us the USD has further to climb:

“our main focus is on the USD. We view its rally thus far as being a normal correction from extreme undervaluation.

“That correction is justified by improvement in the US’s twin deficit fundamentals and FDI inflow prospects.

“It is also supported by the potential for Fed rate hikes. We see the USD as still weak relative to its historical inflation-adjusted average, so it is far too early to start talking about a USD overshoot. We fully expect the USD to rally another 5-15 percent in 2015.”

That said, the pace of ascension in the USD will likely soften. "We don’t think the USD can continue at that same pace; with the speculative community now long it will take core flows to drive the appreciation. Those flows are slower acting," says Anderson.

Canadian Dollar: No Support from the BoC

Concerning the Canadian currency, BMO Capital say:

We expect USDCAD to rise to roughly 1.23 over the next quarter as oil remains soft and Canada’s interest rate premium narrows furtherWe expect USDCAD to level off at around 1.25 after the first Fed rate hike, which we still expect in the summerWe expect oil prices to begin to rebound in the summer and average around $60/bbl in H2 of 2015We expect the Bank of Canada to remain on hold in 2015 even as the Fed begins its tightening phase

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“Therefore, we would fade any CAD strength on the back of a cautious but balanced statement with oil prices implying USD-CAD will move to 1.28 by 3Q before falling to 1.26 into the year-end." Read the 2015 viewpoint from Bank of America Merrill Lynch.