Article by Currency Information and Research

History of The Canadian Dollar

The Canadian dollar is the currency used in Canada. Being the seventh most traded currency in the world it is shortened as C$ to differentiate it from other dollar-dominated currencies. In 1841, a new system was established by the Canadian government under which the new Canadian pound was equivalent to four US-dollars, thus making one pound sterling equal to one pound, four shillings and four Canadian pence. Hence, Canadian dollars were worth sixteen shillings and 5.3 pence.

In 1850, the local population wanted the Canadian dollar to take up the American unit due to the increasing trade links with the United States but the authorities in London still wanted a sterling monetary system to be the only currency used throughout the British Empire. Thus in 1851, the Legislative Council and Legislative Assembly of Canada decided to pass the act of introducing the pound sterling system in correspondence with the decimal monetary system, the idea being that the decimal coins would be in conjunction with the US dollar coinage.
As an adjustment, in 1853 a gold standard was introduced 1 Canadian pound = $US 4.86 2/3. No coinage was provided under the 1853 act. The sterling coinage was made legal while all other acts were canceled. Although the British system allowed the decimal system to be intact, they were nevertheless positive that the sterling system would still be chosen under the title of the 'royals'. Hence when the new decimal system was introduced in 1858, Canadian currency became aligned with the US currency, although the British gold standard still continued to remain legal tender at 1 Canadian pound = $US 4.86 2/3 right until the 1990s. In 1859, Canadian postage stamps were dispatched with denominations of the decimal systems for the first time.

Therefore in 1861, New Brunswick and Nova Scotia followed the Canadian decimal system which was, by then, aligned with the US dollar unit. From then on, the postage stamps were issued with the denominations of dollars and cents. In 1865, unlike Canada, New Brunswick and Nova Scotia, Newfoundland adopted the decimal system based on the Spanish dollars rather than US dollars, though there was a slight difference in the units. In 1867, the three countries united into a federation called the Dominion of Canada, where the currencies of these countries unified into one.

The Uniform Currency Act was passed in 1871, in which various currencies from different provinces were replaced by a single Canadian dollar. The gold standard was momentarily abandoned due to the First World War and its abolishment was finalized on April 10, 1933. However the exchange rate at the outbreak of the Second World War, at 1.1 Canadian dollars = 1 US dollars, changed to parity in 1946. In 1949, sterling was devalued and Canada resumed its value at 1.1 Canadian dollars = 1 US dollars and Canada allowed its dollar to float, returning to its original rate in 1962 only, when the exchange rate was 1 Canadian dollar = 0.925 US dollars. This peg lasted hardly a decade after which the currency's value rose even higher.

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