Canadian dollar

Gold dollar

Independent Canadian dollar

Terminology

Coins

Banknotes

The first paper money issued in Canada denominated in dollars were British Army Bills, issued between 1813 and 1815 in denominations between 1 and 400 dollars. These were emergency issues due to the War of 1812. The first banknotes were issued in 1817 by the Montreal Bank. Large numbers of chartered banks were founded in the 1830s, 1850s, 1860s and 1870s, although many issued paper money for only a short time. Others, including the Montreal Bank (later called the Bank of Montreal), issued notes for several decades. Until 1858, many notes were issued denominated in both shillings/pounds and dollars (5 shillings = 1 dollar). A large number of different denominations were issued, including 1, 2, 3, 4, 5, 10, 20, 25, 40, 50, 100, 500 and 1000 dollars. After 1858, only dollar denominations were used. See Canadian chartered bank notes for more information.

After its establishment in 1841, the Province of Canada began issuing paper money. Notes were produced for the government by the Bank of Montreal between 1842 and 1862, in denominations of 4, 5, 10, 20, 50 and 100 dollars. In 1866, the Province of Canada began issuing its own paper money, in denominations of 1, 2, 5, 10, 20, 50, 100 and 500 dollars. In 1870, following Confederation, the Dominion of Canada introduced 25 cents notes along with new issues of 1, 2, 500 and 1000 dollars. 50 and 100 dollars notes followed in 1872 but the bulk of later government note production was of 1 and 2 dollars note, with 4 dollars added in 1882. Denominations of 500, 1000, 5000 and 50,000 dollars were issued after 1896 for bank transactions only.

The Bank Act of 1871 limited the smallest denomination the chartered banks could issue to 4 dollars, increased to 5 dollars in 1880. To facilitate purchases below 5 dollars without using Dominion notes, Molsons Bank issued 6 and 7 dollars notes in 1871. The government issued 5 dollars notes from 1912. The last 25 cents notes, known as shinplasters due to their small size, were dated 1923.

In 1935, with only ten chartered banks still issuing notes, the Bank of Canada was founded and began issuing notes in denominations of 1, 2, 5, 10, 20, 50, 100, 500 and 1000 dollars. In 1944, the chartered banks were prohibited from issuing their own currency, with the Royal Bank of Canada and the Bank of Montreal among the last to issue notes.

Although the 1 dollar coin was introduced in 1935, it was not until the introduction of the "loonie" that the banknote was withdrawn from circulation. The 2 dollar note was also replaced by a coin in 1996. All banknotes are currently printed by the Canadian Bank Note Company and BA International Inc on behalf of the Bank of Canada.

In 2000, the Bank of Canada stopped issuing 1000 dollar notes and began to withdraw them from circulation, "as part of the fight against money laundering and organized crime."

Even when banknotes are withdrawn, they remain legal tender and can be used or traded at banks. However, once received by the bank, they must be forwarded to the Central Bank for destruction.

Legal tender

Canadian dollar banknotes issued by the Bank of Canada are legal tender in Canada. However, commercial transactions may legally be settled in any manner agreed by the parties involved.

Legal tender of Canadian coinage is governed by the Currency Act which sets out limits of:
40 dollars if the denomination is 2 dollars or greater but does not exceed 10 dollars;
25 dollars if the denomination is 1 dollar;
10 dollars if the denomination is 10 cents or greater but less than 1 dollar;
5 dollars if the denomination is 5 cents;
25 cents if the denomination is 1 cent.

Retailers in Canada may refuse bank notes without breaking the law. According to legal guidelines, the method of payment has to be mutually agreed upon by the parties involved with the transactions. For example, convenience stores may refuse $100 bank notes if they feel that would put them at risk of being counterfeit victims; however, official policy suggests that the retailers should evaluate the impact of that approach. In the case that no mutually acceptable form of payment can be found for the tender, the parties involved should seek legal advice.

Canadian Dollars are accepted by some businesses in the northernmost cities of United States, just as American Dollars are accepted by many Canadian businesses in cities close to the border.

Value

Unlike other currencies in the Bretton Woods system, whose values were fixed, the Canadian dollar was allowed to float from 1950 to 1962. Between 1952 to 1960, the Canadian dollar traded at a slight premium over the U.S. dollar, reaching a high of US$1.0614 on August 20, 1957.

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 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 U.S. dollar for part of the 1970s. The high point was on April 25, 1974, when it reached US$1.0443.




The Canadian dollar fell in value against its American counterpart during the technological boom of the 1990s that was centred on the United States, and was traded for as little as 61.79 cents U.S. on 21 January 2002, which was an all-time low. Since then, its value against all major currencies has risen due, in part, to high prices for commodities (especially oil) that Canada exports.

The CAD's value against the U.S. dollar rose sharply in 2007 due to the continued strength of the Canadian economy and the U.S. currency's weakness on world markets. During trading on September 20, 2007 it met the U.S. greenback at parity for the first time since November 25, 1976.


Inflation in the value of the Canadian dollar was fairly low since the 1990s, but had been severe for some decades before that. In 2007 the Canadian dollar rebounded remarkably, soaring 23% in value.

On September 28, 2007, the Canadian dollar closed above the U.S. dollar for the first time in 30 years, at US$1.0052.
On November 7, 2007, it hit US$1.1024 during trading, a modern-day high,

after China announced it would diversify its US$1.43 trillion foreign exchange reserve away from the U.S. dollar. By November 30, however, the Canadian dollar was once again at par with the U.S. dollar, and on December 4, the dollar had retreated back to US$0.98, through a cut in interest rates by the Bank of Canada, due to concerns about exports to the U.S. The rate has since been fluctuating between US$0.9644 and US$1.0298,Big price gap still exists between Canadian, U.S. goods: study after starting 2008 at just under US$1.01. (The dollar has been as high as US$2.78, reached on 11 July 1864 after the United States had temporarily abandoned the gold standard.) Since late July, however, the Canadian dollar has dropped considerably, reaching 93 U.S. cents by 10 August.

Since 84.2% of Canada's exports go to the U.S., and 56.7% of imports into Canada come from the U.S., Canadians are mainly interested in the value of their currency against the U.S. dollar. Although domestic concerns arise when the dollar trades much lower than its U.S. counterpart, there is also concern among exporters when the dollar appreciates quickly. The rapid rise in the value of the dollar increases the price of Canadian exports to the U.S. On the other hand, there are advantages to a rising dollar, in that it is cheaper for Canadian industries to purchase foreign material and businesses.

The Bank of Canada has no specific target value for the Canadian dollar and has not intervened in foreign exchange markets since 1998.Bank of Canada policy on dollar valuation and intervention in FOREX markets The Bank's current position is that market conditions should determine the worth of the Canadian dollar.

On world markets, the Canadian dollar historically tended to move in tandem with the U.S. dollar. At times an apparently rising Canadian dollar (against the U.S. dollar) may be decreasing against other international currencies; however, during the rise of the Canadian dollar since 2002, it has gained value against the U.S. dollar as well as other international currencies.

Due to its soaring value and new record highs, the Canadian dollar was named the Canadian Newsmaker of the Year for 2007 by Time Magazine Lofty loonie named Time's top Canadian newsmaker

Reserve currency

A number of central banks keep Canadian dollars as a reserve currency. The Canadian dollar is considered to be a benchmark currency.Benchmark currencies of the world

In the economy of the Americas as a whole the dollar plays a similar role to the Australian Dollar (AUD) does in the Asia-Pacific region. The dollar (as a regional reserve currency) has been an important part of the British, French and Dutch Caribbean state's economies since the 1950s.

By observing how the Canadian dollar behaves against the U.S. dollar, global economists can indirectly observe internal behaviors and patterns in the US economy. The dollar has only evolved as a reserve currency since the 1970s when it was floated against all other world currencies.

See also

Economy of Canada

External links

Exchange Rate Lookup
A History of the Canadian dollar
Bank of Canada — bank notes
Royal Canadian Mint
History of the earliest forms currency in Canada
Canadian Paper Money A resource for those interested in learning about and collecting Canadian paper currency

Banknotes of Canada at Will's Online World Paper Money Gallery
Maple Leaf Web: The Canadian Dollar: Nature and Impacts of Canadian Exchange Rates