The Canadian dollar (CAD) is one of the major currencies in the world. It is represented by $ or C$. As of 2007, the
Canadian dollar was the seventh highest traded currency in the world. The inflation rate of the Canadian dollar is low,
which makes it an important benchmark currency and a major reserve currency, demanded by central banks throughout the world.
History of the Canadian Dollar
In the pre-1841 era, coins from various countries (including England, France, Portugal and Spain) circulated freely in Canada.
From August 1, 1854 to 1914, Canada continuously followed the gold standard. From the beginning of World War I to the 1940s,
Canada followed the gold standard intermittently.
On October 2, 1950, Canada adopted the floating exchange rate system. The beginning of interbank trading boosted the
Canadian dollar, which quickly rose to about US$0.95. The technological boom of the 1990s in the US exerted pressure on the
Canadian dollar. The Canadian currency fell to an all-time low of US$0.62 on January 21, 2002. Since then, the Canadian dollar
has risen in value against all major currencies due to the rising prices of energy and other commodities, which are exported by
Canada.
The Canadian dollar rose sharply against the US dollar in 2007. The CAD reached a historic high of US$1.10 in November 2007.
Over the course of the next year, the Canadian currency lost almost one third of its value against the US dollar.
This delivered a huge blow to the country’s tourism sector. The Canadian dollar sank to a record low in five years on
March 9, 2009 due to global recession.
Factors affecting the Canadian Dollar Exchange Rate
Canada and the US share a close foreign trade relationship. Hence, a slowing US economy could greatly affect the value of
the CAD, causing it to depreciate against major currencies across the world, such as the British pound and the Euro.
The value of the Canadian dollar is also impacted by crude oil prices and the central bank lending rates. Oil constitutes
approximately half of Canada’s exports. Thus, falling oil prices has a negative impact on the Canadian dollar to a great extent
and hurts the nation’s economy.
The sovereign credit rating plays a key role in determining the availability of Canadian dollars in the international capital markets.
These ratings indicate growth, stability and efficiency of the international and domestic markets.
Canadian Dollar Exchange Rate
This table shows the correlation between pairs that include the Canadian dollar at the end of March 2009.
| |
USD |
GBP |
CHF |
JPY (100) |
| 1 CHF= |
0.797601 |
0.557865 |
0.908116 |
78.6154 |