The Canadian Dollar is the official currency of Canada. It is often known as the “loonie” or “buck” and has recently gained favour with foreign exchange traders as Canada’s prudent government and resource backed economy have made the dollar a more attractive investment.
There are coins of $2, $1, 10 cents, 5 cents and 1 cent. The coins are legal tender and have to be accepted in payment of debts up to a certain pint, usually to a sum of between twenty or twenty five of the coins in question. So a one cent piece is legal tender up to 25 cents. There are Canadian bank notes of $5, $10, $20, $50 and $100. Although not legal tender in the United States or anywhere outside Canada, Canadian dollars are often accepted by shops in some northern cities close to the border with Canada.
In Canada the Canadian dollar is usually abbreviated as a $ sign, and if it is outside Canada it is usually abbreviated as C$ to distinguish it from the more common United States dollar. On money markets and in certain business circles it is given the abbreviation CAD (the US Dollar is USD and the Pound Sterling is GBP).
The Canadian dollar is also known as or the loonie due to a common loon bird that appears at the back of a two dollar coin. The term “buck”, which is also commonly used in the United States, originated from the fact that beaver hides, or bucks, were used in trading in northern Canada in the early colonial period.
The Canadian Dollar is currently seen as a very strong currency due to the fact that Canada is a resource rich country and that the Canadian government is relatively well run. Canadian dollar has been a freely floating currency for a longer period than most other developed countries’ currencies as although it was in the Bretton Woods system it was allowed to be freely floating for most of that period and was not obliged to keep to a fixed exchange rate with the American dollar.
In the inflationary 1970s the Canadian dollar was trading at a premium to the American dollar, while during the early 1990s when the American economy was seen as very strong and the Canadian dollar traded at a sharp discount, reaching almost as low as 60 US cents to the dollar. Due to the resource boom it has since picked up value and is much closer to parity with the US dollar. The Canadian dollar is used as a secondary reserve currency by many central banks, particularly in the Caribbean and Latin America.
The Canadian Pound, the first Canadian Dollar
The Canadian provinces predominantly traded in British pounds or US dollars before 1841. In 1841 the Canadian Pound was introduced at about three quarters of the value of the British Pound. This was only traded in upper and lower Canada, with other provinces such as Nova Scotia and Halifax having their own sterling based currencies.
Due to Canada’s proximity to the United States the sterling system was seen as inconvenient, particularly because at that time it was not decimalised. Under the dollar system there were 100 cents to the dollar, while the non-decimalized sterling system had twelve pence to the shilling and sixteen shillings and four pence to the pound. The Canadian Pound was the equivalent of four US dollars. Due to a growing trade with the United States there was significant pressure to decimalise the Canadian currency.
The introduction and spread of the Canadian Dollar
The Canadian Dollar was first stuck in 1858 in the Royal Mint in London. It was set in fractions of the US dollar. In 1861 New Brunswick and Nova Scotia also introduced their own dollar currencies. In 1867 all the currencies merged into the Canadian dollar, with Prince Edward Island joining in 1871. In 1865 Newfoundland introduced a different system and it would not be until 1894 that it would introduce the Canadian system.
In 1908 the Royal Mint opened a branch in Ottawa, and Canadian money was no longer struck in London and in 1931 it became the Royal Canadian Mint. In the same year Canada left the Gold Standard. The Royal Canada Mint now strikes all its Canadian coins in Winnipeg in Manitoba and has done so since the 1970s. The Bank of Canada issued its first bank notes in 1935.