A foreign exchange strategist issued a bearish outlook for the Canadian dollar on Monday, projecting the loonie could slip toward 70 cents against the U.S. dollar as other major currencies gain strength.

Dan Tobon, head of G10 FX Strategy at Citi Research, said he doesn’t foresee a sharp collapse but expects factors such as the Bank of Canada’s potential for deeper rate cuts, reduced hedge-related flows, and the loonie’s close ties to the U.S. economy to weigh on the currency.

“We’re not structurally bearish on the dollar, but over the next few months it could remain under pressure,” Tobon told BNN Bloomberg. “It’s unlikely that the Canadian dollar alone will weaken sharply—more likely, both the U.S. dollar and Canadian dollar will underperform against other currencies.”

By Monday afternoon, the loonie was trading near 72 cents U.S.

Tobon added that weaker U.S. labour data could drag on the Canadian dollar due to the two economies’ tight correlation. He also noted that Canadian investors who had been repatriating funds and buying back Canadian dollars to hedge U.S. assets are slowing those flows, removing an important source of support.

He explained that in the past, Canadian investors gained both a hedge and extra yield from holding U.S. assets, since U.S. rates were higher and the U.S. dollar typically performed well in risk-off environments. But this dynamic has shifted. “As we saw back in April, the correlation flipped—risk-off events came with a weaker dollar and higher U.S. Treasury yields. That challenged the long-standing view of the dollar as a reliable hedge,” he said.

Markets currently expect just one more Bank of Canada rate cut over the next year, but Tobon believes more aggressive cuts are possible if economic weakness deepens, even as inflation gradually normalizes amid ongoing Canada-U.S. trade tensions.

He highlighted that Canadian pensions were heavy buyers of the loonie earlier this year, particularly after April, as part of a broader reduction in U.S. dollar exposure.

Looking beyond the U.S. dollar, Tobon warned of greater risks for the loonie against other major currencies, such as the euro and Japanese yen. Currently, one Canadian dollar trades near 0.62 euros and 107 yen.

“It’s difficult to see the Canadian dollar weakening sharply in isolation,” Tobon said. “But if the euro, Australian dollar and others strengthen significantly, the Canadian dollar could slide toward 70 U.S. cents. That’s not a massive move, but it’s meaningful. The bigger question is whether broader weakness against the euro, yen and other currencies emerges.”