Recently, the foreign exchange market has seen dramatic changes, with the Canadian dollar exchange rate experiencing a strong rise. Friday's foreign exchange market data showed that the exchange rate of the Canadian dollar against the US dollar rose to 1 USD to 1.3880 CAD, hitting its highest level in nearly five months. At the same time, the exchange rate of the Canadian dollar against the Chinese yuan also broke through the 5.28 threshold, reaching its highest level since August last year.

The factors behind this exchange rate change are multifaceted. First, the weak US dollar is a key driver. Due to increased uncertainty in US trade policy, investors have begun adjusting their allocation to US assets. RBC Capital Markets analysts pointed out that the US government's fluctuating stance on tariff policies is affecting market confidence, leading to capital outflows from US dollar assets. At the same time, there is a clear divergence in market expectations for monetary policies between the Bank of Canada and the Federal Reserve. Currently, investors expect the Federal Reserve to cut interest rates four times this year, while the expected cuts by the Bank of Canada are only twice. This policy difference has relatively enhanced the attractiveness of Canadian dollar assets. It is worth noting that the Bank of Canada has already signaled caution in its latest interest rate decision, indicating that it will "proceed prudently" with subsequent policy adjustments.

From a technical perspective, the Canadian dollar performed particularly well this week, with a weekly gain of 2.4%, marking its best weekly performance since June 2020. This marks the sixth consecutive week of gains for the Canadian dollar, showing strong market momentum. During intraday trading, the exchange rate of the Canadian dollar against the US dollar reached a high of 72.20 cents.

However, market participants are reminding investors to be aware of potential risks. Capital Economics analysts said that although they no longer predict that the Canadian economy will enter a recession, they still expect GDP growth to approach stagnation. Meanwhile, inflationary pressures may increase, which could prompt the Bank of Canada to cut interest rates further. The institution predicts that the Canadian policy interest rate may fall to 2%, which could put pressure on the Canadian dollar.

In terms of trade, Canada still faces tariff pressure from the United States. Steel, aluminum products, and the automotive industry still need to pay 25% tariffs, with exemptions only available for goods meeting specific conditions. Research by the C.D. Howe Institute shows that these trade barriers are beginning to affect consumer behavior in Canada, with a noticeable decline in the number of people traveling to the US by car.

For ordinary citizens, the impact of the appreciation of the Canadian dollar varies. International students and overseas consumers will benefit directly, as the same amount of renminbi or US dollars can now exchange for more Canadian dollars. However, export companies may face pressure, especially those industries affected by tariffs.

Looking ahead, market views are divided. Some institutions believe that the Canadian dollar may continue to strengthen, while other analysts predict that the exchange rate may fall. The Canadian government is also closely monitoring developments. It is reported that the prime minister's office has convened cabinet members to discuss relevant response strategies.

In this period full of uncertainties, whether individuals or businesses need to closely monitor exchange rate trends and make corresponding financial plans. The market is ever-changing; only by staying alert can one better respond to various possible situations.

Source:

https://www.reuters.com/markets/currencies/repatriation-flows-help-lift-canadian-dollar-four-month-high-2025-04-10/

https://financialpost.com/news/economy/canadian-dollar-rises-above-71-cents-u-s

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