TORONTO, Nov 6 (Reuters) - The Canadian dollar is set to strengthen over the coming year as expected Federal Reserve interest rate cuts weigh on the U.S. dollar and trade uncertainty potentially becomes less of a drag on Canada's economy, a Reuters poll found.
The median forecast of 38 foreign exchange analysts in the October 31-November 5 poll predicted the loonie would strengthen about 3% to 1.37 per U.S. dollar, or 72.99 U.S. cents, in three months, compared to 1.36 expected in a survey last month.
In 12 months, the currency was forecast to gain around 4.5% to 1.35. On Wednesday, the currency touched a near seven-month low of 1.4140.
"A firmer loonie is in no small part driven by expectations for a weaker USD as the Fed continues to cut rates, while the BoC is much more limited," said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.
The Bank of Canada has signaled a possible end to its easing campaign. Last week, it lowered its benchmark interest rate to a three-year low of 2.25% to support the domestic economy which has been badly hurt by the U.S.-led trade war.
"As long as trade uncertainty is clouding the Canadian outlook, the loonie will have trouble gaining traction," Reitzes said. "But once the trade uncertainty is resolved, that will allow the Canadian dollar to catch up to other currencies which have performed better year-to-date."
The loonie has advanced 1.9% against its U.S. counterpart since the beginning of 2025. Among Group of Ten currencies, only the New Zealand dollar has posted a smaller gain.
Canadian Prime Minister Mark Carney is committing billions of dollars to fight U.S. tariffs, boost defense spending and diversify trade, his maiden budget proposal showed on Tuesday.
The United States-Mexico-Canada Agreement, a continental trade pact, is up for joint review in 2026.
(Other stories from the Reuters November foreign exchange poll)
Reporting by Fergal Smith; polling by Indradip Ghosh; editing by Alexandra Hudson
