Canadian Dollar in the Past and in the Present

Two Dollar Bill by Hot Meteor
Two Dollar Bill by Hot Meteor

The predecessor of the Canadian dollar was the Canadian pound, equal to 4 US dollars and 92.88 grains gold. The Canadian pound was worth 16 shillings 5.3 pence sterling. In 1853, an act of the Legislative Council and Assembly of Canada introduced the gold standard into Canada, with the gold sovereign being legal tender at £1 = $US4.86 2⁄3. Later, three currencies were adopted in Canadian provinces: New Brunswick and Nova Scotia followed Canada in adopting a decimal system based on the U.S. dollar unit, and Newfoundland went decimal later, based on the Spanish dollar.

The federal Parliament passed the Uniform Currency Act in April 1871, tying up loose ends as to the currencies of the various provinces and replacing them with a common Canadian dollar. The golden standard was definitively abolished in 1933. Shortly before the Second World War, the exchange rate to the U.S. dollar was fixed at 1.1 Canadian dollars = 1 U.S. dollar. In the middle of the last century, Canada allowed its dollar to float and return to a fixed exchange rate in 1962, when the dollar was pegged at 1 Canadian dollar = 0.925 U.S. dollar. Since 1970, the currency’s value has floated.

Historically, the Canadian dollar tended to fluctuate in tandem with the U.S. dollar. Last week, the Canadian dollar hit a 3.5-year high, and North American markets staged their biggest one-day rally of the year, according to CBC news last week. The exchange rate now is 1.04778 U.S. dollars. Market concerns about possible inflation as the US Federal Reserve expands its money supply by $600 billion and about recovery measures come to an end this summer.

“This is a U.S. dollar story as the combination of loose monetary policy and a compromised fiscal position weigh heavily against the [greenback],” said Scotia Capital chief currency strategist Camilla Sutton. According to CBC, metal prices also factored into the Canadian dollar’s rise.

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