The loonie is ending 2021 on a somewhat sour note, almost exactly unchanged from levels at the end of 2020, even after an early-year pop. Looking into 2022, the Canadian dollar will firm, in the opinion of economists at the Bank of Montreal.

New oil prices highs to lift the loonie

“Even with some modest further firming in the US dollar in the coming year, we still look for a small gain in the Canadian dollar (from an admittedly soft starting point) on a global recovery, on the BoC leading the Fed, and on supportive commodity prices.” 

“The CAD could be bolstered by oil prices reaching new multi-year highs in the second half of 2022, as demand recovers more fully, and it becomes apparent that supply is simply not responding. In turn, this could reinforce the upside potential for the loonie, even amid a cloudy growth backdrop.”