How Exchange Rates Affect Canadians: What a Weak Loonie Costs

On September 15, 2026, one Canadian dollar bought about 72 U.S. cents. In 2021 it averaged closer to 80. Nothing about a laptop, a hotel room or a bag of coffee changed in those five years, but the number of Canadian dollars it takes to buy them did.

Inflation usually gets the blame for rising prices, and usually that’s right. The exchange rate is part of it too, and it reaches almost everything Canada buys from somewhere else.

What is an exchange rate?

An exchange rate is what one currency is worth in another. In mid-September 2026, one U.S. dollar cost about $1.39 Canadian, which is another way of saying one Canadian dollar bought about 72 U.S. cents. Those two numbers are the same fact written from opposite ends.

Rates move every business day. The Bank of Canada publishes an official daily rate (opens in a new tab), but it doesn’t set that rate or try to hold the dollar at a certain level. The Canadian dollar floats, so it’s worth whatever buyers and sellers around the world will pay for it that day.

When the loonie is strong, your money goes further on anything priced in another currency. When it’s weak, the same purchase takes more Canadian dollars. Nothing about the product has to change for its price here to move.

Where is the Canadian dollar now?

The loonie fell steadily from about 80 U.S. cents in 2021 to about 71.5 in 2025, and it has edged back up to about 72 this year. Even after that small recovery, a U.S.-priced item takes roughly 10% more Canadian dollars than it did five years ago, before any fees.

Annual averages of the Bank of Canada’s daily USD/CAD rate. The 2026 figure covers January 1 to September 15.

Year to year, the moves look small. Stacked up, they’re the difference between a $1,000 USD purchase costing $1,254 and costing $1,384.

Why does the exchange rate affect everyday life?

Because Canada buys a lot from other countries, and nearly all of it is priced in a foreign currency first. Groceries, electronics, cars, clothing, streaming subscriptions, hotel rooms and U.S. stocks all pass through the exchange rate before they reach you.

Imported goods cost more

Imagine a laptop listed at $1,000 USD. At 80 cents, it works out to about $1,250 Canadian. At 72 cents, the same laptop is about $1,390. The laptop didn’t change. Your currency did.

Retailers don’t change their prices overnight. They buy inventory months ahead, so a weaker dollar usually shows up as a slightly higher shelf price a season or two later, spread across a whole store rather than announced on one product. It’s also why a currency move and a round of tariffs look the same from the checkout, even though they work differently.

Travel costs more, and the fee lands on top

A $100 U.S. dinner costs about $125 Canadian at 80 cents and about $139 at 72. Then your card adds a foreign currency conversion charge. The Financial Consumer Agency of Canada’s worked example (opens in a new tab) uses 2.5%, which is typical, and it applies to every purchase made in another currency. That turns the $139 dinner into about $142.

On $3,000 U.S. of spending across a two-week trip, the currency move alone is about $390 more than the same trip would have cost in 2021, and the conversion charge adds roughly another $100 on top.

There’s one more trap, at the payment terminal. When a machine abroad offers to charge you in Canadian dollars instead of the local currency, it’s applying its own exchange rate, and that rate is usually worse than your card’s. Choosing the local currency is almost always cheaper.

U.S. investments convert twice

Plenty of Canadians hold American stocks, and those are priced in U.S. dollars. Your return then has two moving parts: what the stock did, and what the dollar did.

Say you put $1,000 U.S. into an American stock when one U.S. dollar costs $1.39 Canadian. That’s $1,390 out of your account. The stock gains 10%, to $1,100 U.S. If the loonie has strengthened to $1.30 by the time you look, your holding is worth $1,430 Canadian, a gain of under 3%. If the loonie has weakened to $1.45 instead, that same 10% gain is worth $1,595, or about 15%.

It runs both ways, so the exchange rate can help your return as easily as hurt it. Some funds sold in Canada hedge the currency out for a small fee and some don’t, so it could be worth checking which kind you hold.

What makes the Canadian dollar rise or fall?

The loonie floats, which means nobody sets its price. The Bank of Canada doesn’t target a level for it (opens in a new tab). The dollar is worth what buyers around the world will pay, and that depends mostly on how much they want what Canada sells.

Interest rates

When Canadian interest rates are higher than those in other countries, holding Canadian dollars pays better and money flows in. When they’re lower, it flows back out. The Bank of Canada’s policy rate was 2.25% in September 2026, below the American equivalent, and that gap is part of why the loonie sits where it does.

Commodity prices

Canada exports oil, gas, lumber, potash and metals. When those prices rise, more money flows into the country and demand for Canadian dollars rises with it. The Bank of Canada’s own description is that when raw material prices go up the currency tends to float up, and when they fall it drifts down.

How the economy is doing

Growth, employment and confidence in Canadian assets all pull money in. Weak numbers push it back out. This is the slowest of them to move and the hardest to judge while it’s happening.

Global events

Trade disputes, elections, wars and financial shocks push investors toward safer currencies, and the U.S. dollar is usually the one they pick. The loonie can fall in a week when nothing about Canada has changed at all.

What can you do when the dollar is weak?

Nobody can move the exchange rate. What you can control is when you convert your money, and how ready you are when prices jump.

• Plan large foreign purchases instead of making them on the spot. If you know a trip or a U.S. purchase is coming, watch the rate over a few weeks rather than converting the day before. Two cents on the loonie is worth about $190 on a $5,000 U.S. purchase.
• Check what your card charges. The conversion fee is in your cardholder agreement. A handful of Canadian cards charge nothing on foreign purchases, and if you travel or shop in U.S. dollars often, that’s worth more to you than most rewards programs.
• Don’t judge an investment on one year of currency. A strong loonie can flatten a good year and a weak one can flatter a bad one. Neither tells you much about the company you bought.
• Keep a cushion. A price jump is only a crisis when there’s nothing set aside. An emergency fund is what turns a sudden cost into an annoyance.

Where saving comes in when the dollar is weak

You can’t do anything about the loonie. You can do something about how much slack you have when prices move, and in a year like this one that’s most of the argument for saving at all.

Lodavo is a free app that rewards you for saving. Every $25 in your savings or chequing account earns you a free ticket in a weekly cash draw, so a balance that’s just sitting there gives you a chance to win cash every week too. At least $100 goes to a Canadian every week and prizes reach $10,000, and you can watch the winning numbers come out each week.

Your savings stay in your own account at your own Canadian bank, earning whatever interest they already earn.

The rate moves either way

The exchange rate is one of those things you can watch and never control, like the weather or the price of gas. It fell for four years straight and has crept back up this year, which is the usual pattern. What you can control is how ready you are when it moves against you, and that depends on how much you have set aside.

Ready to make saving more interesting? Download Lodavo free on the Apple App Store (opens in a new tab) or Google Play Store (opens in a new tab) and start earning tickets for this week’s draw.

Terms and conditions apply. No purchase necessary (alternate method of entry available). Skill-testing question required. Open to legal residents of Canada who are the age of majority. Odds depend on the number of eligible entries received. Full rules and odds at our contest rules.