Canadian dollar

The dollar (currency code CAD) has been the currency of Canada since 1858. It is normally abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies.There are various common abbreviations to distinguish the Canadian dollar from others: while the ISO currency code CAD (a three-character code without monetary symbols) is common, no single system is universally accepted. C$ is recommended by the Canadian government (e.g., per The Canadian Style guide) and is used by the International Monetary Fund, while Editing Canadian English indicates Can$ and CDN$; both guides note the ISO scheme/code. The abbreviation CA$ is also used, e.g., in some software packages. It is divided into 100 cents. The Canadian dollar is the monetary basis for the Canadian economy, with all coins manufactured by the Royal Canadian Mint and all bills manufactured by the Canadian Bank Note Company.

History

Spanish Dollars

The first dollars used in Canada were Spanish dollars, eight reales coins issued by Spain and her colonies. Because the colonies used the £sd system for accounting (see Canadian pound), it was necessary to set a valuation or rating for the Spanish dollar in £sd. Different ratings were used in the different colonies. The Halifax rating was introduced c.1750 and was the most commonly used in the northern colonies. It valued the Spanish dollar at 5 shillings (the value of the silver in the coin was equal to 4 shillings 6 pence, the "London rating").

After the American War of Independence, Empire loyalists, settling in Upper Canada (Ontario), brought the York rating (named after New York) of 1 Spanish dollar = 8 shillings. This was officially outlawed (in favour of the Halifax rating) in 1796 but continued to be used well into the 19th century.

During this period, many local banknotes were issued denominated in £sd, dollars, or both. The Bank of Montreal issued notes denominated in dollars in 1817 whereas the Atlantic colonies, with stronger ties to Britain and weaker ones to the United States, preferred the £sd system. Some dollar denominated banknotes bore a depiction of the Spanish dollar coin(s) they were equal to. However, few coins were issued, as the British authorities were unwilling to allow the colonies to mint their own coins. Various different bank tokens were issued in denominations of ½ and 1 penny.

In the French speaking parts of Canada (Lower Canada, formerly New France, later Quebec), the £sd and dollar system swiftly replaced the livre following the conquest by Britain. The dollar was called the piastre on some French language banknotes, whilst some bank tokens were issued in 1 and 2 sous denominations, equal to ½ and 1 penny.

Gold Dollars

In 1841, the new Province of Canada declared that its dollar was equal to the gold U.S. dollar and was worth 5 shillings. The silver Spanish dollars were rated at 5 shillings 1 penny, whilst 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 colonies that came together in the Canadian Confederation progressively adopted a decimal system over the next few years. Whilst New Brunswick adopted a dollar equivalent to the Canadian dollar (see New Brunswick dollar), Nova Scotia and Newfoundland did not adopt the same dollar (see Nova Scotian dollar and Newfoundland dollar). Nova Scotia retained its own currency until 1871, whilst Newfoundland issued its own currency until joining the Confederation in 1949.

Finally, 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 World War I, and definitively abolished on April 10, 1933.

Circulating currency

Banknotes

Main article: Canadian banknotes

Canadian banknotes are currently issued in $5, $10, $20, $50, and $100 denominations. All notes are identical in size, but each denomination has a different predominant colour: $5 is blue; $10 is purple; $20 is green; $50 is red, and $100 is brown. By late 2006, all new notes will have a full set of modern security features, including a holographic strip, watermark, and other factors. They are issued by the Bank of Canada.

Coinage

Main article: Canadian coinage

Coins are minted by the Royal Canadian Mint, and currently issued in 1¢, 5¢, 10¢, 25¢, 50¢, $1, and $2 denominations. The standard set of faces has Canadian symbols (primarily wildlife) on the reverse, and an effigy of Elizabeth II on the obverse. Commemorative coins with differing reverses are also issued on an irregular basis. 50¢ coins are rarely found in circulation; they are often collected and not used in day-to-day transactions.

Terminology

Canadian English, like American English, uses the slang term "buck" for a dollar; the word "loonie", owing to the loon on the back of the dollar coin, is also used to distinguish the Canadian dollar from other currencies, as in "The loonie performed well today on currency markets." With the adoption of the two-dollar coin in 1996, "toonie" is also commonly used in Canadian English slang.

In French, the currency is also called le dollar; Canadian French slang terms include piastre or piasse (equivalent to "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 cent is generally used for the subdivision; sou is another, informal term.

Value

Inflation in the value of the Canadian dollar has been fairly low since the 1990s, but had been severe for some decades before that.

Since about 85 per cent of Canada's external trade is with the United States, Canadians are mainly interested in the value of their currency against the United States dollar (USD).

Unlike other currencies in the Bretton Woods system whose values were fixed, the Canadian dollar was allowed to float from 1950 to 1962. From 1952 to 1960, the Canadian dollar traded at a slight premium over the US dollar, reaching a high of US$1.0614 on 20 August 1957 (the all-time high of US$2.78 was reached on 11 July 1864 after the United States abandoned the gold standard).

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 about 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 US dollar for part of the 1970s. The high point was on 25 April 1974 when it reached US$1.0443. The Canadian dollar has continued to float since then, but it has not been above the US dollar since 1976.

Since setting an all-time low of US$0.6179 on January 21, 2002, the Canadian Dollar rallied through 2003, 2004, 2005 and the first months of 2006. It reached US$0.85 on November 26, 2004, US$0.87 on December 13, 2005 and set a 28-year high of US$0.9111 during trading on May 9, 2006.

On world markets, the Canadian dollar tended historically to move in the same direction as 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. However, during the relatively sharp rise of the Canadian dollar since 2002, it has "parted way" 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 is 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, Canadian industry enjoys advantages from a rising dollar, primarily in that it is cheaper to purchase foreign material and businesses.

References and notes

External links

Currencies of Canada | Economic history of Canada

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