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UBS Raises Its U.S. Dollar/Canada Dollar Forecast for End 2025, 2026

BY MT Newswires | ECONOMIC | 09/22/25 12:00 PM EDT

12:00 PM EDT, 09/22/2025 (MT Newswires) -- The Canadian dollar (CAD or loonie) has been lagging other G10 currencies in part due to weaker domestic jobs data, which has translated into the Bank of Canada resuming rate cuts, said UBS.

Meanwhile, currency hedging flows have quieted down after at least one pension fund rushed to reduce its US dollar (USD) exposure in H1, wrote the bank in a note to clients.

While UBS is scaling back its views, directionally the bank still sees CAD as more likely to surprise to the upside in the coming months.

The bank sees scope for further BoC easing as limited, given its proximity to the lower end of the neutral range and in any case, already priced in. In fact, fiscal policy might prove more important as the Prime Minister Mark Carney government has pledged "ambitious" investment plans ahead of the upcoming Federal budget announcement.

The bank also thinks it's possible that hedging flows will resume more forcefully once the cost of hedging falls, along with the narrowing in the U.S.-Canada rate differentials. For 2026, UBS sees CAD starting to gradually weaken again in the direction of the bank's long-term fair value and as Canadian structural productivity headwinds remain unresolved.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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