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Currencies |
| CANADIAN DOLLAR |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of Canadian dollar | Weekly
trend of Canadian Dollar |
| Introduction |
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Dollar is the official currency of a long list of countries and
economies including the Unites States of America that is the most
dominant currency among all dollar currencies. A dollar is denoted
with "$" sign and has "cent" as its subunit.
The Canadian dollar is the national currency of Canada as the name
suggests, and stands among the most important currencies of the
world. The ISO 4217 currency code for the Canadian dollar is CAD,
CA representing the country name and D representing the name of
the currency i.e. dollar. The numeric code of the currency is 124.
It is serving as the medium of exchange in the country since 1858.
Sometimes for distinguishing the Canadian dollar from the other
dollar denominated currencies it is symbolized as "C$"
and the Canadian cents are symbolized as "C¢".
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Overview
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Canadian dollar is one of the few currencies that are considered
to be the benchmark for the rest of the currencies in the world.
It is the 7th most heavily traded currency in the world. The
Canadian dollar is popular for the slang terms that are assigned
to the currency and currency units like "buck" is slang
in American English that is used to refer to the currency unit,
"loonie" is a name given to dollar and sometimes, to $1
coin because of design of the coin depicting a single loon, "toonie",
a derivative term from the previous one used for the $2 coin etc.
Also, there had been some misconceptions and myths regarding the
various currency units like
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The center of the $2 coin can be popped
out.
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The 50¢ coin is no longer minted and
issued.
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The coins are minted at Regina,
Saskatchewan as the obverse side of the coin has "Regina"
engraved on it
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An American flag is depicted on Canadian
paper money.
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A new $10 series was called up because
there was a misprint in the poem, which is printed on $10
notes.
All the above-mentioned examples are mere
misconceptions, and are not true.
The inflation rate in context of Canadian
dollar has ever been quite low helping it to gain importance as a
benchmark currency. That is the reason why; it forms an important
reserve currency as well and is demanded by several central banks
over the world. Under the Bretton Woods system, the currencies had
to fix their exchange rate but this was not the case with the
Canadian dollar. It was allowed to float from 1950 to 1962 and was
once, valued more than that of the US dollar. The value of the
dollar fell after 1960 and it had to revert back to the fixed rate
regime but then in 1970 again, the floating rate regime was
adopted. Currently, 85% of the country’s trade involves trade
with the United States, the Canadian dollar is unofficially pegged
to the US dollar. The import and export @ less than and equal to
10000 CAD of all currencies is free and amount exceeding must be
declared.
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Structure
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The Canadian dollar like all other modern
currencies uses the decimal system and is
divided into 100 parts of the sub unit of the
currency that is cents. The Bank of Canada
(termed as Banque du Canada in French language)
manages the flow of the currency in the country
as the central bank. It issues the banknotes and
also performs the function of circulating the
notes and coinage that forms part of the
currency. The responsibility of the actual
production of currency notes is outsourced by
the central bank to the Canadian Bank Note
Company and BA international Inc. The Canadian
Royal mint has been provided with the sole
authority to mint the dollar coins in Canada.
Currently the Canadian banknotes are issued
in 5 denominations namely $5, $10, $20, $50 and
$100. The notes bear writings in both the
official languages of Canada i.e. English and
French. They are of same size and are
differentiated on the basis of different color
schemes i.e. blue color scheme for $5 note,
purple color scheme for $10 note, green color
scheme for $20 note, red color scheme for $50
note and brown color scheme for $100 note. These
notes also have the Braille features that help
the blind people to recognize the value of the
note easily. Till now, 6 series of the currency
banknotes and 2 commemorative notes have been
issued.
The coinage in the currency
is issued for the smaller value units for 7
denominations i.e. 1¢, 5¢, 10¢, 25¢, 50¢,
$1 and $2. All the coins have a common obverse
side showing the engraved image of Elizabeth II
and initials in French language "Elizabeth
II D.G Regina" meaning "Elizabeth II,
by the grace of god, queen". The reverse
sides of the coins possess different symbolic
images like the 1¢ coin has an image of two
maple leaves on a common twig depicting the
national symbol of the country, the 5¢ coin has
an image of a beaver which represents the
industrious image of the country, the 10¢ coin
has an image of a bluenose schooner representing
pride and maritime skills, the 25¢ coin shows
an image of a north American caribou that is a
symbol of Canadian wilderness, the 50¢ coin
depicts the image of Canadian court of Arms to
honor the founding nations of the country, the
$1 coin, popular with the name "loonie",
has an image of a loon representing the voyageur
theme of the country and the $2 coin, known as
"toonie" possess an image of an adult
bear representing the balance and composition.
The coins except the 50¢ coin are frequently
used in the day-to-day operations.
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| History |
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The history of the first dollars in Canada dates back
to the period prior to the American independence when
whole of the country was colonized by the European
super powers. Spanish dollar was the first dollar
currency that was issued in Canada, with most of the
colonies still used the £sd system of accounting. The
value of the Spanish dollar was a topic of much
controversy as different colonies used different
ratings to value the currency. After the American war
of independence, the value of one dollar was fixed at
8 shillings according to the York rating but the
Halifax rating replaced it that suggested that value
of the dollar equal to 5 shillings. Some banknotes in
dollar and £sd were also issued at that time, the
first dollar notes being issued by the Bank of
Montreal in 1817.
In 1841, the newly formed
province of Canada pegged its dollar at par with the
US gold dollar and fixed the rate equal to 5
shillings. The £sd system of accounting was replaced
by the decimal system in 1858 making the use dollar
and cents instead of pounds and shillings. Somehow a
few colonies still made the use of their own currency
but after the passing of the Uniform currency act in
1871, Canadian dollar was adopted as a single currency
as a replacement of the other currencies. During the
First World War, the gold standard of the currency was
temporarily given up and was completely abandoned in
1933. In 1935, the bank of Canada was established that
took over the function of issuing and circulating the
currency from the charted banks and the federal
government.
The bank of Canada, after it was
formed, has issued 6 banknotes series till now. The
first one was issued right after its inception in
1935. $25 and $500 notes were issued for the first
time in the history of the country in this series. The
second series of banknotes was issued soon after in
1937 as some changes were to the made according to the
changes in the government legislation and the death of
King George V in 1936. The portraits of the members of
royal family in the first series were replaced in this
series with the portrait of King George VI and the
former Canadian prime ministers. Both of the official
languages were included on the text of the notes and
color variations were adopted. The third series was
issued following the Queen Elizabeth’s rise to the
throne in 1952. the portrait of King George VI was
replaced with the portrait of the queen and altogether
a different look was adopted for the note’s design.
This series became somewhat controversial as the image
on the note highlighted a smiling demon behind the ear
of the queen. The fourth series was issued in 1967 to
introduce some new changes in the note, especially the
use of multicolored tints behind the dominant color to
check upon the problem of counterfeiting. Advanced
security features were introduced in the next series
i.e. the fifth series that was issued in 1986. The $1,
$2 and $1000 were also taken out of the circulation
during this period. The current series that is being
used currently was issued in 2001 till 2004 with
enhanced security and tactile features.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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