Everything about Canadian Dollars totally explained
The
dollar (
ISO 4217 code:
CAD) is the
currency of
Canada. It is normally abbreviated with the
dollar sign $, or
C$ to distinguish it from other
dollar-denominated currencies. It is divided into 100
cents.
History
Gold dollar
In 1841, the new
Province of Canada declared that its dollar was equal to the gold
U.S. dollar and was worth 5 shillings in local currency. The silver
Spanish dollars were rated at 5 shillings 1 penny and the
British sovereign was rated at 1 pound 4 shillings 4 pence, the proper value due to its gold content compared to that of the gold U.S. dollar.
Independent Canadian dollar
The Province of Canada declared that all accounts would be kept in dollars and cents as of
January 1,
1858, and ordered the issue of the first official Canadian coins in the same year. The dollar was pegged at par with the
U.S. dollar, on a gold standard of 1 dollar = 23.22
grains gold.
The colonies that came together in the
Canadian Confederation progressively adopted a decimal system over the next few years.
New Brunswick,
British Columbia and
Prince Edward Island adopted dollars equivalent to the Canadian dollar (see
New Brunswick dollar,
British Columbia dollar and
Prince Edward Island dollar). However,
Nova Scotia and
Newfoundland didn't adopt the same dollar (see
Nova Scotian dollar and
Newfoundland dollar). Nova Scotia retained its own currency until 1871, but Newfoundland issued its own currency until joining Confederation in 1949, although the value of the Newfoundland dollar was adjusted in 1895 to make it equal to the Canadian dollar.
The federal Parliament passed the Uniform Currency Act in April 1871, tying up loose ends as to the currencies of the various provinces and replacing them with a common Canadian dollar. The
gold standard was temporarily abandoned during the
First World War and definitively abolished on
April 10,
1933. At the outbreak of the
Second World War, the exchange rate to the U.S. dollar was fixed at 1.1 Canadian dollars = 1 U.S. dollar. This was changed to parity in 1946. In 1949, sterling was devalued and Canada followed, returning to a peg of 1.1 Canadian dollars = 1 U.S. dollar. However, Canada allowed its dollar to float in 1950, only returning to a fixed exchange rate in 1962, when the dollar was pegged at 1 Canadian dollar = 0.925 U.S. dollar. This peg lasted until 1970, after which the currency's value has floated.
Terminology
Canadian English, like
American English, uses the slang term "
buck" for a dollar. Because of the appearance of the
common loon on the back of the dollar coin that replaced the dollar bill in 1987, the word "
loonie" was adopted in Canadian parlance to distinguish the Canadian dollar from other currencies, as in "The loonie performed well today on currency markets". When the two-dollar coin was introduced in 1996, the derivative word "
toonie" became the common word for it in Canadian English slang.
In
French, the currency is also called
le dollar;
Canadian French slang terms include
piastre or
piasse (same as "buck," but the original word used in eighteenth-century French to translate "dollar") and
huard (equivalent to "loonie", since
huard is French for "loon," the bird appearing on the coin). The French pronunciation of "cent" (pronounced similarly to English as /sɛnt/, not like the word for hundred /sɛ̃/) is generally used for the subdivision;
sou is another, informal term.
The original One Dollar coin was a copy of the original Voyageur Canoe coin. During transportation to the mint (in 1986 or 1987) the plates were lost or stolen resulting in a complete redesign of the coin to the current Loon.
Coins
In 1858, bronze 1 cent and .925 silver 5, 10 and 20 cents coins were issued by the Province of Canada. Except for 1 cent coins struck in 1859, no more coins were issued until 1870, when production of the 5 and 10 cents was resumed and silver 25 and 50 cents were introduced. Between 1908 and 1919,
sovereigns (legal tender in Canada for 4.866 dollars) were struck in Ottawa with a "C" mintmark. Gold 5 and 10 dollars coins were issued between 1912 and 1914.
In 1920, the size of the 1 cent was reduced and the silver fineness was reduced to .800. In 1922, the silver 5 cent was replaced by a larger, nickel coin. In 1935, a silver 1 dollar coin was introduced. In 1942, as a war-time measure, nickel was replaced by
tombac in the 5 cent coin, which was changed from round to dodecagonal. Chromium-plated steel was used for the 5 cents between 1944 and 1945 and between 1951 and 1954, before nickel was permanently readopted. The 5 cents returned to a round shape in 1963.
In 1968, .500 silver 10 and 25 cents coins were issued, before silver was replaced by nickel. At the same time, the sizes of the 50 cents and 1 dollar coins were reduced. In 1982, the 1 cent coin was changed to dodecagonal and the 5 cents was switched to a cupro-nickel alloy. In 1987, a 1 dollar coin struck in aureate-plated nickel was introduced. A
bimetallic 2 dollars coin followed in 1996. In 1997, copper-plated zinc replaced bronze in the 1 cent. This was followed, in 2000, by the introduction of plated-steel 1, 5, 10, 25 and 50 cents coins, with the 1 cent plated in copper and the others plated in cupro-nickel.
Coins are produced by the
Royal Canadian Mint in
Winnipeg,
Manitoba, and currently issued in denominations of 1¢ (
penny), 5¢ (
nickel), 10¢ (
dime), 25¢ (
quarter), 50¢ (
50 cent piece) (though the 50 cent piece is rarely used), $1 (
loonie), and $2 (
toonie). The standard set of designs has Canadian symbols, usually wildlife, on the reverse, and an effigy of
Elizabeth II on the
obverse. However, some pennies, nickels, and dimes remain in circulation that bear the effigy of
George VI. Commemorative coins with differing reverses are also issued on an irregular basis. 50 cent coins are rarely found in circulation; they're often collected and not regularly used in day-to-day transactions. There have been repeated talks about removing the penny from circulation as it's estimated that it costs the Royal Canadian Mint up to four cents to produce and distribute a one-cent coin. The Canadian penny costs at least C$130 million annually to keep in circulation, estimates a financial institution that called for an end to the penny.
A 2007 survey shows that only 37% of Canadians use pennies but the government continues to produce about 816 million pennies per year, equal to 25 pennies per Canadian.
Even when banknotes are withdrawn, they remain legal tender and can be used or traded at banks. However, once received by the bank, they must be forwarded to the Central Bank for destruction.
Legal tender
Canadian dollar banknotes issued by the Bank of Canada are
legal tender in Canada. However, commercial transactions may legally be settled in any manner agreed by the parties involved.
Some business in Canada is transacted in United States dollars, despite United States currency not being legal tender.
Legal tender of Canadian coinage is governed by the
Currency Act which sets out limits of:
- 40 dollars if the denomination is 2 dollars or greater but doesn't exceed 10 dollars;
- 25 dollars if the denomination is 1 dollar;
- 10 dollars if the denomination is 10 cents or greater but less than 1 dollar;
- 5 dollars if the denomination is 5 cents;
- 25 cents if the denomination is 1 cent.
Retailers in Canada may refuse bank notes without breaking the law. According to legal guidelines, the method of payment has to be mutually agreed upon by the parties involved with the transactions. For example, convenience stores may refuse $100 bank notes if they feel that would put them at risk of being
counterfeit victims; however, official policy suggests that the retailers should evaluate the impact of that approach. In the case that no mutually acceptable form of payment can be found for the tender, the parties involved should seek legal advice.
Value
Unlike other currencies in the
Bretton Woods system, whose values were
fixed, the Canadian dollar was allowed to
float from 1950 to 1962. Between 1952 to 1960, the Canadian dollar traded at a slight premium over the U.S. dollar, reaching a high of US$1.0614 on
20 August,
1957.
The Canadian dollar fell considerably after 1960, and this contributed to Prime Minister
John Diefenbaker's defeat in the
1963 election. The Canadian dollar returned to a
fixed exchange rate regime in 1962 when its value was set at US$0.925, where it remained until 1970. As an
inflation-fighting measure, the Canadian dollar was allowed to float in 1970. Its value appreciated and it was worth more than the U.S. dollar for part of the 1970s. The high point was on
25 April 1974, when it reached US$1.0443.
The Canadian dollar fell in value against its American counterpart during the
technological boom of the 1990s that was centred on the United States, and was traded for as little as 61.79 cents U.S. on
21 January 2002, which was an all-time low. Since then, its value against all major currencies has risen due, in part, to high prices for commodities (especially
oil) that Canada exports. Its value against the U.S. dollar rose sharply in 2007 due to the continued strength of the Canadian economy and the U.S. currency's weakness on world markets. During trading on
20 September 2007 it met the U.S. greenback at parity for the first time since
25 November 1976.
Inflation in the value of the Canadian dollar was fairly low since the 1990s, but had been severe for some decades before that. In 2007 the Canadian dollar rebounded remarkably, soaring 23% in value. On
28 September 2007, the Canadian dollar closed above the U.S. dollar for the first time in 30 years, at US$1.0052.
On
7 November,
2007, it hit US$1.1024 during trading, a modern-day high
after China announced it would diversify its US$1.43 trillion foreign exchange reserve away from the U.S. dollar. By
30 November, however, the Canadian dollar was once again at par with the U.S. dollar, and on
4 December, the dollar had retreated back to US$0.98, through a cut in interest rates by the Bank of Canada, due to concerns about exports to the U.S. The rate has since been in a state of constant flux between US$0.96 and US$1.03, after starting 2008 at just under US$1.01. (The dollar has been as high as US$2.78, reached on
11 July 1864 after the United States had temporarily abandoned the gold standard.)
Since 84.2% of Canada's exports go to the United States, and 56.7% of imports into Canada come from the United States, Canadians are mainly interested in the value of their currency against the U.S. dollar.
On world markets, the Canadian dollar historically tended to move in tandem with the U.S. dollar, but less dramatically. A consequence is that at times an apparently rising Canadian dollar is often falling against most of the world's currencies, and vice-versa, since Canadians tend to compare only against the U.S. dollar rather than other world currencies. However, during the relatively sharp rise of the Canadian dollar since 2002, it has "parted ways" with the U.S. dollar and has gained value against it, while also rising against other major international currencies.
Although there was a great deal of domestic concern when the Canadian dollar was trading much lower than the U.S. dollar, there's also concern among exporters when the dollar appreciates quickly. The rapid rise in the value of the Canadian dollar increases the price of Canadian exports to the United States, which make up a large part of the economy. On the other hand, there are advantages to a rising dollar, in that it's cheaper for Canadian industries to purchase foreign material and businesses. The Bank of Canada has no specific target value for the Canadian dollar and hasn't intervened in
foreign exchange markets since 1998. The Bank's current position is that market conditions should determine the worth of the Canadian dollar.
Due its soaring value and new record highs against the American currency, the Canadian dollar was named the
Canadian Newsmaker of the Year for 2007 by
Time Magazine
Reserve currency
A number of central banks keep Canadian dollars as a
reserve currency. The Canadian dollar is considered to be a
benchmark currency.
Further Information
Get more info on 'Canadian Dollars'.
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