The Bank of Canada, together with the Ministry of Finance, administers the
currency. With the introduction of foreign exchange controls in September 1939, a rather large unofficial or black market for Canadian Dollars in New York and for U.S. Dollars in Canada came into being. The black market vanished in 1950 after the removal of the controls. The Canadian Dollar's exchange rate is made
in New York's currency market and in Montreal and Toronto, which transact the
largest volume of Canadian Dollars.
The dollar in the 1970s
Immediately following the Government's announcement that it would allow the Canadian dollar to float, the currency appreciated sharply, rising roughly 5 per cent to about US$0.97. It reached a high of US$1.0443 on 25 April 1974. The strength of the Canadian dollar through this period can largely be attributed to continued strength in the prices of raw materials and large inflows of foreign capital. During the early 1970s, the dollar's strength was also due to the general weakness of the U.S. currency against all major currencies as the Bretton Woods system of fixed exchange rates collapsed.
The strength of the Canadian dollar against its U.S. counterpart during this
period concerned the authorities, whose endeavor to lower Canadian short-term
interest rates and narrow rate differentials with the United States helped to relieve some of the upward pressure on the Canadian dollar.
The currency moved up to the US$1.03 level during the summer of 1976. However, political uncertainty (the election of a Parti Quebecois government in Quebec on 15 November 1976), softening prices for non-energy commodities, concerns about Canada's external competitiveness related to rising cost and wage pressures, and a substantial current account deficit, sparked a protracted sell-off of the dollar which lasted until the end of 1978. The dollar fell to under US$0.84 by the end of this period.
The dollar in the 1980s
Throughout the 1980s, the Canadian dollar traded in a wide range, weakening
sharply during the first half of the decade, before staging a strong recovery
during the second half.
The weakness of the currency in the early 1980s can be attributed, most importantly, to continuing weakness in commodity prices, periodic concerns about the commitment of the Canadian authorities to an anti-inflationary policy stance, and a significant appreciation of the U.S. dollar against most other major currencies.
Initially stabilizing at about US$0.72, the dollar began an upward trend against
the U.S. dollar, which lasted through the remainder of the decade. The currency
was boosted by various factors including a buoyant economy led by a re-bound
in commodity prices, expansionary fiscal policy at both the federal and provincial
levels, and a significant tightening of monetary policy aimed at cooling an
overheating economy and reducing inflationary pressures. The Canadian dollar closed the decade at US$0.8632.
The dollar in the 1990s
The dollar suffered two series of downward pressures in the 1990s.
The dollar depreciates through 1992 to 1994, reflecting lowered interest rates
as a result of easier monetary conditions, budgetary problems, softening commodity prices and large current account deficits.
A degree of stability in the Canadian dollar was temporarily re-established
through 1995 and 1996 owing to a number of factors. The Canadian dollar traded in a relatively narrow range close to US$0.73 through much of this period.
Renewed weakness in the currency began to emerge in 1997 and became increasingly apparent in 1998 despite strong economic fundamentals. Once again, much of the slide in the currency could be attributed to lower commodity prices which weakened significantly as the financial and economic crisis in emerging markets widened and intensified. The large negative interest rate differentials between Canadian
and U.S. financial instruments and the U.S. dollar's role as a safe-haven currency also weighed against the Canadian dollar. The Canadian dollar touched an all-time low of US$0.6311 on 27 August 1998 before recovering somewhat following aggressive action by the Bank of Canada.
Sources of reference include:
1. World Currency Yearbook. (WCY)
2. A History of the Canadian Dollar
to the exchange rate regime
Canadian Dollar per U.S. Dollar
|2 May 1962||The Canadian Dollar ($A), divided into 100 Cents, was a monetary unit with a floating exchange rate until May 2, 1962.|
On May 2, a fixed Official Rate of Can$1.081 per U.S. Dollar was established. (WCY 1990/93, p.251)
|1 June 1970||The Canadian Dollar was again placed on a floating, though controlled, basis.|
The Canadian Dollar continued its status as a floating currency after the floating of the U.S. Dollar on August 15, 1971. (WCY 1990/93, p.251)
|18 December 1971||The Canadian Dollar's inoperative Official Rate was theoretically realigned to Can$0.9957 per Greenback following the U.S. dollar devaluation, based on the unchanged gold content of the Ottawa's unit. (WCY 1990/93, p.251) || |
|13 February 1973||The Canadian Dollar's theoretical Official Rate was again realigned to Can$0.8962 per U.S. Dollar after its devaluation. (WCY 1990/93, p.251) || |
|31 December 1974|| ||0.991 |
|31 December 1975|| ||1.016 |
|31 December 1976|| ||1.009 |
|31 December 1977|| ||1.094 |
|31 December 1978|| ||1.186 |
|31 December 1979|| ||1.168 |
|31 December 1980|| ||1.195 |
|31 December 1981|| ||1.186 |
|31 December 1982|| ||1.229 |
|31 December 1983|| ||1.244 |
|31 December 1984|| ||1.321 |
|31 December 1985|| ||1.396 |
|31 December 1986|| ||1.381 |
|31 December 1987|| ||1.300 |
|31 December 1988|| ||1.193 |
|31 December 1989|| ||1.158 |
|31 December 1990|| ||1.160 |
|31 December 1991|| ||1.156 |