The Canadian Dollar

by admin on October 10, 2013 · 1 comment

Canadian Currency


The history of the Canadian dollar is a long one. Canadian currency can be traced back to the early 1600’s when beaver pelts were the one universally accepted medium of exchange. Later on, wheat and moose skins became legal tender only to be replaced by strings, wampum, and belts made from shell beads. Four purple beads or eight white beads purchased one penny.

Coins were first introduced as currency by French colonists. By 1685, money was printed on playing cards and only in 1722 copper coins were introduced. The Montreal Bank, later to become the Bank of Montreal, issued the first bank notes in Canada in 1817. Other banks soon followed suit and the notes became the main means of payment in British North America.

In 1841, the Province of Canada adopted a new system based on the Halifax rating. The new Canadian pound was equal to four U.S. dollars (92.88 grains gold), making one pound sterling equal to 1 pound, 4 shillings, and 4 pence Canadian. The new Canadian pound was worth 16 shillings and 5.3 pence.

Between the years 1854 and 1914, The value of the Canadian dollar was fixed according to the gold standard and was valued at par with the U.S. currency. Both U.S. and British gold coins were acceptable legal tender.

During the First World War, the gold standard was temporarily abandoned and was decisively abolished on April 10, 1933. After the Canadian Confederation consolidated the colonies of Canada, New Brunswick, and Nova Scotia, the government decimalized the currency and a new series of coins were introduced. The Bank of Canada was established in 1934 with the first issue of banknotes a year later.

At the outbreak of the Second World War, the exchange rate to the U.S. dollar was fixed at C$1.10 = US$1.00. This was changed to parity in 1946 but several years later, Canada followed Britain’s devaluation of the sterling by devaluating its dollar, whereupon the value returned to a peg of C$1.10 = US$1.00.

In 1950, the currency was allowed to float and only reverted back to a fixed exchange rate in 1962 when the dollar was pegged at C$1.00 = US$0.925. It remained at this rate till 1970, when the currency’s value was once again floated. The first Loonie coin was introduced in 1987 and the two-dollar coin (often called the Toonie) was launched in 1996. In 2011, the Central Bank of Canada issued a new series of bank notes printed on a polymer material.

The Canadian Dollar is the seventh-most traded currency on the Forex market, with numerous institutions and individuals trading the CAD. The Canadian Dollar is a commodity currency and is held as a reserve currency by a number of central banks.

The Canadian dollar is also referred to as the Loonie, buck, Huard, and Piastre (in French). Currency coins are minted by the Royal Canadian Mint in Winnipeg, Manitoba and are now issued in denominations of 5¢ (nickel), 10¢ (dime), 25¢ (quarter), 50¢ (50¢ piece), $1 (loonie) and $2 (toonie). (The 50¢ piece is no longer distributed to banks and is only available directly from the mint, therefore seeing very little circulation.) The last 1¢ (penny) to be minted in Canada was on Friday, May 4, 2012 but ceased its distribution on February 4, 2013. Since then, the price for a cash transaction may be rounded to the nearest nickel, though the penny continues to be legal tender.

Since 1970, the Canadian dollar has seen many fluctuations in price against the U.S. dollar, closing above the U.S, dollar for the first time in 30 years on September 28, 2007.

Cina Coren is a contributing editor to Daily Forex and a freelance writer for various publications.

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