Canadian Dollar – Currency Overview

• ISO Code: CAD
• Symbol: $ or C$
• Subunit: 1/100 Cent
• Inflation: 2.4%
• Nickname: Buck, Loonie

Historical Overview

The British Province of Canada declared the dollar as its official currency on January 1, 1858, and proceeded to issue the first official Canadian coins later that year. The exchange rate of the Canadian dollar was pinned to the U.S. dollar, on a gold standard of 1 dollar = 23.22 grains gold.

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The colonies of the Canadian Confederation adopted the new currency gradually. British Columbia, New Brunswick and Prince Edward Island adopted dollars equivalent to the Canadian, unlike Nova Scotia and Newfoundland. Nova Scotia continued to utilize its own currency until 1871, while Newfoundland retained its own currency right up until it joined the Confederation in 1949, although its value was equated to the Canadian dollar in 1895.

The Uniform Currency Act was passed by federal Parliament in 1871 replacing regional currencies with the common Canadian dollar. Canada first abandoned the gold standard during the WWI, and then again in 1933, this time for good. Throughout WWII, the exchange rate was fixed at 1.1 Canadian dollars per U.S. dollar, returning to parity after the war. In 1950, Canada floated its currency's value, becoming the only free floating currency in the Bretton-Woods system. The Canadian dollar returned briefly to a fixed exchange rate from 1962 until 1970, and has been floating ever since.

There has been little Inflation in the value of the Canadian dollar since the 1990s, although it had been severe for some decades previously. In 2007 the Canadian dollar soared 23% in value, marking a phenomenal rebound.

Similarly to Americans, Canadians use the slang term "buck" for a dollar. The word "loonie" became popular in reference to the Canadian dollar because of the depiction of the common loon (an aquatic bird resembling a duck) on the back of the dollar coin which replaced the dollar bill in 1987. When the two-dollar coin was introduced in 1996, it was nicknamed "toonie" appropriately.

Current Global Status

The Canadian dollar is one of the eight major world currencies and is kept as a reserve currency in a number of central banks. The Canadian dollar is considered to be a benchmark currency.

Against the US Dollar

Since most of Canada's exports and imports are to and from the United States, Canadians are largely concerned about the value of their currency against the U.S. dollar.

In the global markets, the Canadian dollar historically has been inclined to move together with the U.S. dollar, albeit less dramatically. As a consequence, an apparently rising Canadian dollar can often be actually falling against most of the major currencies, or vice-versa, since the Canadian dollar is often compared to the U.S. dollar alone, neglecting the other currencies. Since 2002 however, the Canadian dollar has gained value and split from the U.S. dollar, while also making headway against other major currencies.

Although the Canadian dollar caused grave domestic concern when it was trading much lower than the U.S. dollar, a quick appreciation of the currency has also caused a great deal of concern among exporters. A dramatic rise in the Canadian dollar's value hikes up the prices of Canadian exports to the US, which account for a significant part of the economy. There are still advantages to a rising dollar, since it makes it cheaper for Canadian industries to purchase businesses and materials elsewhere.

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