Canadian Dollar Introduction

The Canadian dollar is Canada's legal tender and has been used since 1858. It is usually abbreviated as, C, Can$ or Canadian dollar. 1 Canadian dollar is equal to 100 Canadian cents. The currency symbol of the Canadian dollar is "$" and the national currency code is "CAD". The Canadian dollar is one of the seven major currencies in circulation in the world and is also the foreign exchange reserve currency of some central banks.

History of the Canadian Dollar

The history of the Canadian dollar dates back to 1841, when the Canadian province adopted a new monetary system based on the Halifax system. The new Canadian pound was equal to 4 U.S. dollars (92.88 grains of gold), and one British pound was equal to 1 Canadian pound, 4 shillings and 4 pence. Therefore, the new Canadian pound is equivalent to 16 shillings and 5.3 pence in the pound.

Beginning in 1850, there was a decade-long debate over whether Canada should adopt a monetary system based on the pound sterling or a decimal monetary system based on the U.S. dollar. Due to increasingly close trade relations with the United States, local residents expected the currency units of Canada and the United States to be interchangeable, but authorities in London still favored the idea of a British monetary system, as the pound was the only currency in use throughout the British Empire.

In 1851, the Legislative Council of Canada and the Canadian Provincial Parliament passed a coinage act that combined the pound unit with a decimal system. The idea was to have a currency minted in decimal mode that would correspond to the U.S. dollar. As a compromise, the Canadian Provincial Legislature and Provincial Assembly passed an act in 1853, creating Canada's gold standard based on the British Sovereign and American Eagle gold coins. This gold standard recognized the sovereign as legal tender and 1 pound = 4.86 and 2/3 US dollars.

However, in 1857, the Canadian province decided to introduce a decimal currency that would correspond to the U.S. dollar. Thus, when the new decimal currency was introduced in 1858, the currency of the Canadian provinces was brought into line with that of the United States, although the British sovereign remained legal tender and the ratio of 1 pound = 4.86 and 2/3 Canadian dollars remained until It ended in the 1990s.

In 1867, Canada, New Brunswick and Nova Scotia merged to form the Dominion of Canada, and the three currencies were unified. In 1871, Prince Edward Island joined the U.S. dollar-based decimal system. After Prince Edward Island became the Dominion of Canada in 1872, its currency was merged with the Canadian dollar. The Federal Parliament passed the Unified Currency Act in April 1871, and the Canadian dollar replaced the provincial currencies.

During World War I, Canada temporarily abandoned the gold standard, then explicitly canceled it on April 10, 1933. When World War II broke out, the exchange rate between the Canadian dollar and the U.S. dollar was fixed at 1.1 Canadian dollars = 1 U.S. dollar. In 1946, the two reached parity. In 1949, as the pound depreciated, the exchange rate fell back to 1.1 Canadian dollars = 1 U.S. dollar. In 1950, Canada loosened its exchange rate peg to the U.S. dollar and allowed the Canadian dollar to float. It was not until 1962 that Canada reset its peg to 1 Canadian dollar = 0.925 U.S. dollars. The linked exchange rate lasted until 1970, when the Canadian dollar was allowed to float freely.

Before the creation of the Bank of Canada in 1934 and during a transitional period thereafter, banknotes issued by the government and banknotes issued by chartered banks were circulated on the market at the same time. Later, banknotes issued by Chartered Banks gradually withdrew from circulation. By the end of 1949, banknotes issued by Chartered Banks were rarely used in practice. Since the Bank of Canada in 1935, Canada has issued a total of seven series of banknotes, namely the 1935 edition, the 1937 edition, the 1954 edition, the Canadian Scenery Series, the Canadian Birds Series, the Canadian Journey Series and now the Pioneer Series. 

Canadian Dollar Issuer

The issuing agency of the Canadian dollar is the Bank of Canada, which is responsible for formulating and executing Canada's monetary policy, maintaining financial stability, managing the government's public accounts and foreign exchange reserves, and issuing banknotes and coins. The Bank of Canada issues monetary policy reports six times a year, publishes interest rate announcements eight times a month, and regularly releases other economic and financial data and analysis.

Canadian Dollar Face Value

Canadian dollar banknotes are available in denominations of $5, 10, 20, 50 and 100, and coins are available in denominations of 1, 5, 10, 25, 50 cents and 1 and 2 dollars. The Canadian dollar banknotes are printed with important figures in Canadian history, such as Queen Elizabeth II, former Prime Minister Mackenzie King, former Governor General Frederick Barton Lawrence, etc. Canadian dollar coins are printed with Canada's national emblem, national flower, maple leaf, wild animals and other patterns. The most distinctive one is the 1 yuan coin, nicknamed "loonie" because it has a white-billed loon printed on the back.

Factors Affecting the Canadian Dollar Exchange Rate

The exchange rate of the Canadian dollar is affected by a variety of factors, such as global commodity prices, U.S. economic and monetary policy, international trade and investment flows, market sentiment, etc. Since Canada is an export-oriented economy, its main export commodities include crude oil, natural gas, metals, lumber, etc., so the Canadian dollar has a strong positive correlation with the prices of these commodities. In addition, since the United States is Canada's largest trading partner, the U.S. dollar also has a strong influence on the Canadian dollar. Generally speaking, a stronger U.S. dollar will lead to a weaker Canadian dollar and vice versa.