Manual A History of the Canadian Dollar

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In , the federal government issued notes for five hundred dollars and one thousand dollars, featuring Queen Victoria on the five hundred-dollar note and an allegorical female figure with the arms of Canada on the one thousand-dollar note. This was followed in by a four-dollar note featuring the then Governor general, the Marquess of Lorne. Under the new Bank Act passed in , the chartered banks were limited to issuing notes in denominations of four dollars and over.

The government closed off this loophole in By an amendment to the Bank Act , Parliament provided that the banks could only issue notes in denominations of five dollars and higher, and also only in multiples of five dollars. In , the banks were required to operate redemption offices for their notes across the country, which meant that bank notes no longer traded at a discount if they were far from a branch of the bank.

In , the federal government began to issue large denomination notes whose usage was restricted to the chartered banks. Their purpose was to assist the banks in maintaining their reserves of Dominion notes, as required by the Bank Act , and also to assist the banks in settling their cash balances with each other. The notes stated on their face that they were "Legal tender note for use by Banks only", which led to their common name, "Bank legals".

Bank legals ceased to be issued after the establishment of the Bank of Canada. During the British colonial period, the colonies were generally prohibited from minting their own coins. After Confederation, the first Canadian coins were also minted in London, but the possibility of a Canadian mint began to be raised in public debates. Under the British Coinage Act, , the British government could establish branches of the Royal Mint in overseas British possessions. The second coin struck was a one cent piece.

US dollar to Canadian dollar exchange rates

In , the Canadian government took over full control of the Ottawa branch of the Royal Mint, renaming it the Royal Canadian Mint and bringing it under the authority of the Minister of Finance. When first created in , the Canadian dollar was partially backed by gold. Under the Dominion Notes Act , the government was required to have gold reserves of up to twenty per cent of the value of the first five million dollars of notes issued, rising to twenty-five per cent of the value of the next three million dollars issued.

The combination of the gold standard, the fixed value of the Canadian dollar to both the pound sterling and the US dollar, and the lack of any controls on the export of gold meant that the federal government did not have much ability to implement monetary policy. As a result, Canada experienced several periods of rapid economic contraction and expansion in the period between the establishment of Canadian currency and the outbreak of World War I.

Instead, the bank notes acquired status as legal tender. Canada was off the gold standard. As well, the federal government authorised the Minister of Finance to act as a lender of last resort to the banks to ensure their stability, one of the first steps towards the establishment of a central bank.


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Although it was widely expected that Canada would return to the gold standard after the War, it was not until that the government did so. Following the return to the gold standard, British and United States gold coins, government of Canada notes, and Canadian coins were legal tender. Bank notes ceased to be legal tender. However, the return was short-lived.

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Britain went off the gold standard in September , during the depths of the Great Depression. Canada followed suit by prohibiting export of gold on October 31, , unofficially taking Canada off the gold standard.


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A year and a half later, the federal government ended the convertibility of government notes for gold. It was expected to be a temporary measure until the world economic situation improved, but Canada has never returned to the gold standard. As the Depression continued in Canada, pressure grew on the federal government to take greater control over the economy, including monetary policy.

The proposal had broad support from the two main political parties, but was opposed by the Canadian banks on monetary policy grounds, and also because of concern about loss of profits if they could no longer issue bank notes. The federal government acted on the recommendation and passed the Bank of Canada Act in The Bank was given an array of powers, including custodian of the gold reserves of the government, lender of last resort to chartered banks, and issuer of notes on behalf of the government.

WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interest of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the Dominion; [82]. One former Deputy Governor of the Bank of Canada has stated that the Bank implements this mandate in three ways: "first, by keeping inflation low, stable, and predictable; second, by supporting a safe and efficient financial system; and third, by issuing money that is safe from counterfeiting and readily accepted".

On March 11, , the first day of its operation, the Bank issued its first series of notes. The previous Dominion notes, issued by the Minister of Finance, were rapidly withdrawn from circulation. The series was the only Bank of Canada series to include a twenty-five-dollar note and a five hundred-dollar note. The twenty-five-dollar note was a special commemorative note, for the twenty-fifth anniversary of George V's accession to the throne.

No subsequent series has had a note of the same denomination. All series since then have been bilingual. As the Bank of Canada became established, the federal government gradually reduced the power of the chartered banks to issue their own bank notes. In , the banks were given ten years to reduce their notes in circulation to twenty-five per cent of their paid-up capital. In , the last remaining power to issue banknotes, for use outside Canada, was abolished and the Bank of Canada became the sole issuer of Canadian notes. Since Canada has gone off the gold standard, it has fluctuated between fixed and floating exchange rates.

The Canadian dollar currently has a floating exchange rate, since As part of the reforms associated with the creation of the Bank of Canada and the economic difficulties of the Great Depression, Parliament also passed the Exchange Fund Act in The purpose of this Act was to create a fund, derived from the profits of the Bank of Canada, which would enable the government and the Bank to "aid in the control and protection of the external value of the Canadian monetary unit", [90] i.

However, the government did not use this power initially, allowing the dollar to float against other currencies. The situation changed in the immediate run-up to World War II. Both the pound sterling and the Canadian dollar began to slip against the United States dollar in August , as war began to seem inevitable.

New Zealand Dollar(NZD) To Canadian Dollar(CAD) Exchange Rates History

Britain imposed exchange controls in early September. Canada followed in mid-September, imposing exchange controls under the War Measures Act , which gave extensive powers to the federal Cabinet. The government also imposed strict currency controls on exchanges with foreign currencies, particularly the United States dollar. Those measures lasted throughout the war, with some changes to the fixed exchange rates.

After the war ended, the government maintained the fixed rates and exchange controls for some years.

However, that was balanced out by an unofficial exchange rate established by US markets, which triggered an extensive debate about the merits of a policy of floating exchange rates. In , the federal government decided to switch to a policy of floating exchange rates, while maintaining the restrictions on currency exchanges. The rationale was a concern about an increase in inflation if the Canadian dollar continued to be fixed against the US dollar, as was required by the Bretton Woods agreement.

The decision to switch to a floating rate called into question the need for restrictions on currency exchanges, and those restrictions were gradually lifted during At the end of , the exchange restrictions were abolished entirely. Canada stayed on a floating exchange rate for twelve years, in spite of urgings from the International Monetary Fund to return to the fixed rate system under Bretton Woods. The Governor favoured keeping the exchange rate floating, coupled with a restrictive monetary policy. He came under criticism for that approach, since Canada was going through a period of high unemployment and low inflation.

The Diefenbaker government favoured a return to fixed rates within the Bretton Woods system and a more expansionary monetary policy.

The dispute escalated until Coyne resigned his position. The government introduced legislation to provide for a fixed rate, within a permitted range. Both the economic situation and the political controversies contributed to downwards pressure on the dollar. The Canadian government and the Bank of Canada negotiated with other countries and central banks for supports for the dollar. The government found it necessary to intervene in the money markets in support of the dollar. In , rising inflation and inflow of foreign exchange led to pressures on the dollar.

The government was concerned that massive and expensive interventions in the foreign exchange market would be required to maintain the dollar within the fixed rate band.

New Zealand Dollar(NZD) To Canadian Dollar(CAD) Exchange Rates History - FX Exchange Rate

In May , the government announced that it would allow the dollar to float. Although the decision was criticised by the International Monetary Fund, which continued to favour the Bretton Woods approach, within three years all major currencies were floating against the United States dollar. The Canadian dollar has had a floating exchange rate ever since.

Duguay, a former Deputy Governor of the Bank of Canada, has stated that a flexible exchange rate favours a trading nation such as Canada, which produces commodities and also manufactured goods. He argues that a flexible exchange rate facilitates economic adjustment by sending important price signals to producers and consumers, encouraging prompt adjustments to changing economic circumstances. It also permits the Bank to adopt monetary policies which focus on controlling domestic inflation. Canada's current coinage dates to , when the Mint introduced new designs for the coins.

The coinage had featured the monarch on the obverse of all coins, with a wreath of maple leaves surmounted by a crown on the reverse. The re-design continued to feature the monarch on the obverse of all coins, but introduced new patterns for the reverse of each coin:. These designs were all the work of Emanuel Hahn. With the exception of the withdrawal of the penny, these designs continue to be the basic features of Canadian coinage. This series of coins was augmented in by the introduction of a new one-dollar coin, featuring a loon on the reverse, designed by Robert-Ralph Carmichael.

A brief history of the Canadian dollar

The coin quickly became known as the " loonie ", [98] which in turn has become a nickname for the Canadian dollar generally. The loonie was followed by the introduction of a two-dollar coin in , designed by Brent Townsend. The two-dollar coin quickly acquired its own nickname, the " toonie ".


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However, given the length of the Queen's reign, four different versions of her effigy have been used, updated with her age: , , and The Canadian coins using these effigies are similar to those used on other Commonwealth coins of those periods. The and effigies were designed by Canadian artists: Dora de Pedery-Hunt designed the effigy, [99] and Susanna Blunt designed the effigy. Although these designs are the basic pattern for the coinage, the Mint regularly introduces commemorative coins, either for the entire series of coins, or on individual coins. Those commemorative issues are normally for a limited time period.