• Kinashi-San

The Canadian Dollar

Updated: Feb 16

The Canadian dollar, nicknamed the loonie about the plunge (loon) depicted on the $ 1 coin, is the currency in Canada. The code that represents Canadian currency internationally is CAD, and its symbol, $, or C $, distinguish it from other dollar currencies.

The Canadian dollar (currency symbol: $; ISO 4217 code: CAD; locally, CAN, $ CA and $ C are used) has been the official currency of Canada since 1858. In 1858, the new Canadian government decided to adopt the dollar, subdivided into 100 cents like that of the United States.


Coins and Banknotes

The current series of Canadian banknotes, The Polymer Series, launched in 2011 is the seventh series issued by the Bank of Canada, five denominations are available: $ 5, $ 10, $ 20, $ 50 and $ 100. The bills are all the same size, but they have their colour: blue for the $ 5, purple for the $ 10, green for the $ 20, red for the $ 50 and finally brown for the $ 100. The coins in circulation are the 5 ¢, 10 ¢, 25 ¢, 50 ¢, as well as the $ 1 or $ 2 coins. The Royal Canadian Mint ceased production of 1 ¢ coin in 2013. The first $ 1 coins (the loonie) were produced in 1987 to replace banknotes of the same value; in 1996, the $ 2 bills were also replaced by coins.


Coins

Penny (1 cent)

Unit ($) : $0.01

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Maple Leaf

Comment: For economic reasons, the 1-cent coin ceased to be distributed on February 4, 2013. However, it remains legal tender and can be used. Merchants are asked to round off amounts owed to them by their customers (for example, for a purchase of $ 10.01, the merchant is asked to charge $ 10). This is only applied to cash transactions.


Nickel (5 cents)

Unit ($) : $0.05

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Beaver


Dime (10 cents)

Unit ($) : $0.10

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Bluenose


Quarter (25 cents)

Unit ($) : $0.25

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Woodland caribou


50 Cent Piece (50 cents)

Unit ($) : $0.50

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Coat of arms of Canada

Comment: This piece is produced regularly, but in small quantities (around 450,000 per year). It is not used, the automatic systems do not accept it and it is not currently in circulation, but it is still legal tender. This piece is rather reserved for collectors.


Loonie (1 dollar)

Unit ($) : $1.00

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Common loon





Toonie (2 dollars)

Unit ($) : $2.00

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Polar bear






Banknotes

Unit ($) : $5

Figure on the obverse: Sir Wilfrid Laurier

Figure on the reverse: Canadarm2 and Dextre. Canadian Space Agency






Unit ($) : $10

Figure on the obverse: Sir John Alexander Macdonald

Figure on the reverse: The Canadian train






A variant of this note was issued in 2017 to celebrate Canada's 150th birthday. There are portraits of Sir John Alexander Macdonald, Sir George-Étienne Cartier, Agnes Macphail and James Gladstone.

Figure on the obverse: Viola Desmond

Figure on the reverse: Canadian Museum for Human Rights


This post is the first and unique to be vertical.





Unit ($) : $20

Figure on the obverse: Queen Elizabeth II

Figure on the reverse: Canadian National Vimy Memorial (France)





Unit ($) : $50

Figure on the obverse: William Lyon Mackenzie King


Figure on the reverse: CCGS Amundsen, Research Icebreaker





Unit ($) : $100

Figure on the obverse: Sir Robert Borden

Figure on the reverse: Medical Innovation







Characteristics

The Canadian dollar is part of what we call “commodities currencies”, that is to say, currencies of countries whose exports of raw materials represent a very large part of the economy. The Australian dollar, the Russian ruble or the Norwegian krone is also commodity currencies. The Canadian dollar is particularly linked to the large quantities of oil that the country exports to the United States. If the price of a barrel increases, the Canadian dollar will appreciate against the American dollar.


The term Canadian dollar also refers to the value of the Canadian currency compared to foreign currencies. Within the floating exchange rate system, the value of the Canadian dollar is always determined by the foreign exchange market, where the Canadian dollar is among the most traded currencies. The Canadian dollar is considered a benchmark currency since it is held by several central banks around the world. Mainly chartered banks and large corporations in Toronto, Montreal, and New York participate in the foreign exchange market. The Canadian dollar is often referred to as a "commodity currency" since its value is usually correlated with the price of commodities, such as lumber, minerals and crude oil.

Why is the Canadian dollar weaker than the US dollar?

Three factors are contributing to the decline of the dollar.

First, the US economy is strong and attracts more investors. The US dollar has appreciated not only against the Canadian dollar but also against most of the world's currencies.


Pressure from oil prices on the dollar

Second, with Canada being a major energy producer, falling oil prices are putting pressure on our dollar.


Finally, the central banks of Canada and the United States are taking divergent paths. The Bank of Canada cut its key rate to get the economy going. However, the US Federal Reserve took the opposite route at the end of the year and began to increase its own.

Strength of the US Economy

The US economy is expected to remain strong this year due to strong demand for consumer goods driven by a strong labour market and lower consumer debt. The United States will also benefit from high business confidence and increased government spending.

Meanwhile, declining investment in the energy sector is expected to continue to dampen Canada's economic growth. The global oil supply continues to exceed demand; reduced investment will eventually eliminate these surpluses, but the transition is slow.

Finally, the Federal Reserve raised interest rates ahead of the Bank of Canada, putting further downward pressure on our dollar.

The loonie should remain weak

All of these factors militate in favour of maintaining the Canadian dollar at a relatively low level against the US dollar.


Obviously, the weak dollar makes winners and losers. It disadvantages importers, such as retailers and wholesalers, but benefits exporters, as evidenced by the strong growth in the value of Canadian exports to the United States in recent years, excluding petroleum products.

The Perfect Time to Export

In conclusion, if you were considering growing your business by exporting to the United States, now is a perfect time as the US economy is expected to grow vigorously. You also have the advantage of earning US dollars for the sale of manufactured products by spending Canadian dollars.

What are the risks for the consumer?

A weak Canadian dollar increases the import bill. Ultimately, for consumers, the price of certain imported products, such as fruits and vegetables, clothing and electronics, could rise. Inflation may therefore be a little high.


Other expenses could cost more, including travel to the United States.

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