The Canadian Dollar – Seventh Most Traded Currency in the World

The Canadian dollar has shared an intimate relationship and interesting history with the British pound.

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Prior to the 1860’s and the introduction of a unified Canadian dollar the region relied on a barter system, and later foreign currencies, to take care of the economic needs. The official Canadian dollar came into circulation in 1967 with the birth of the Dominion of Canada, and was a unification of the currencies used by the Province of Canada, New Brunswick and Nova Scotia. This allowed the government to begin efforts to unify all of the provinces under one monetary system.

Those efforts paid off, and today the Canadian dollar is the seventh most traded currency in the foreign exchange market using the code CAD. The dollar is represented by the $ sign or C$, with each one divided into 100 cents. Because of the economic soundness of Canada and stability of their political system its currency is popular with central banks and is the fifth most held reserve currency in the world, only following the US dollar, euro, Japanese yen and British pound sterling.

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Value and exchange rates of the Canadian Dollar

Throughout its history, Canada has used everything from furs to playing cards as currency. It was the French who first introduced coins to the nation in the 1660’s, but were only used to pay their taxes and buy European goods. With a lack of coins to use to buy local goods, the colonial authorities began to place value on the back of playing cards in order to pay soldiers. Throughout the 18th century, the coin shortage continued and the government began printing paper money from cardboard in order to fill the deficit.

Starting in 1841, the Province of Canada began using the Halifax rating. This new Canadian Pound was equivalent to four US dollars, while it took an additional four shillings and four pence to equal one British pound sterling. There was much debate over whether to adopt a sterling monetary system or to use a decimal one based off of the US dollar. This debate lasted well into the 1950’s, with the end result being an alignment of Canadian currency to the US dollar in 1858.

The Province of Canada, New Brunswick and Nova Scotia united in a federation called the Dominion of Canada in 1867, merging their three currencies into one Canadian dollar. By 1873, Prince Edward Island joined this federation and Canada was finally on its way towards having its own, uniform currency to trade with.

With the passing of the Uniform Currency Act in 1871, all of the provinces were now using the Canadian dollar based on the gold standard. The gold standard was abandoned during World War I, and by the start of World War II the rate was fixed against the US dollar at $1.10 CAD. When Canada began to float its currency in the 1950’s, it rose in value in comparison to the USD for over ten years.

The British pound and Canadian dollar have a long history. The relationship between Britain and Canada has always been intimate — the countries once shared a military, a government system and heads of state. Despite the two nations sharing a legacy, they have grown apart both economically and politically.

In the 19th century, Britain was Canada’s largest trade partner, with the British pound valued at more than 2.0 CAD. In the 20th century, the exchange rate has averaged at 2.03, but the last 10 years have brought the GBP > CAD exchange rate to under 2.0.

The decline of the British pound accelerated after the “Brexit” vote. Since the Brexit referendum — or Britain’s proposed exit from the EU — in June 2016, the GBP has gradually declined against the CAD, reaching 1.63 in January 2017 compared with 1.97 a year earlier.

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History of the Canadian Dollar

It was the War of 1812 that finally ended the currency shortage in Canada and led to the creation of hard currency. The colonies issued army bills to help in financing the war, and when it ended the British government redeemed those for their full value. With a newfound trust in paper money, banks began sprouting up in Canada. By 1822, the Bank of Montreal had received its charter and was able to begin circulating money. They were followed by other banks, and by 1858 the first official Canadian coin system was executed.

The first domestically issued coins were struck in 1908 at the Ottawa branch of the Royal Mint which by 1911 was producing 256,000 coins a year. By this time, all of the coins being minted bore the effigy of His Majesty George V, who had acceded to the throne in 1910.

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Coins and banknotes of the Canadian dollar

The Canadian Dollar-01

The Canadian Dollar-02

The modern Canadian banknote has come a long way from dollar values being written on the back of playing cards. Canada is now using polymer for their banknotes, a durable material that has less of an impact on the environment. You will find them used in Canada in the following denominations:

  • $5 note. Former Prime Minister Sir Wilfrid Laurier is depicted on the five dollar note, along with a picture of the Mackenzie Tower.
  • $10 note. Issued in 1971, the ten dollar note features one of the founding fathers of the confederation, Sir John A. Macdonald.
  • $20 note. The $20 note always includes a portrait of Queen Elizabeth II, which is updated each time a new series of bank notes is issued. In September of 2015 a commemorative 20 dollar note was issued which also features a much younger picture of the queen taken in 1951. This note was specially issued to mark the date in which Queen Elizabeth’s reign exceeded that of Queen Victoria.
  • $50 note. An image of Canada’s longest serving Prime Minister, William Lyon Mackenzie King is used on the 50 dollar note.
  • $100 note. The portrait used on the 100 dollar note is that of Sir Robert Borden, Canada’s eight Prime Minister and the leader who helped see the nation through the First World War.

All Canadian coins feature Queen Elizabeth II on their obverse side, with an image reflecting the nation’s heritage on the reverse:

  • 1 cent. Shows a picture of the maple leaf
  • 5 cent. Depicts a beaver
  • 10 cent. The Bluenose
  • 25 cent. A caribou
  • 50 cent. The Canadian coat of arms
  • 1 dollar. Voyageurs in a canoe on the silver coin and the common loon on the gold dollar coin
  • 2 dollar. A polar bear
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