The Canadian dollar popularly known amongst traders as well as non-traders as CAD, is signified by $; It is the official and government certified currency pertaining to Canada. It’s also called by a slang name – buck, just like Americans call their dollar by the same name. Later on in around 1996, as two dollar coin was introduced in the economy the French slang Loonie also became a popular term for Canadian currency.

The currency has been shortened with the Dollar/Peso sign $, or sometimes is even referred to as C$ standing for Canadian Dollar which helps to give it a logical and unique identity which also helps people to be able to tell it apart from other countries and currencies where dollar is the official mode of exchange. Canadian Dollar is made of 100 cents. Until the year 2007, the Canadian dollar coveted 7th most seventh highest exchangeable money worldwide. The currencies which are ahead of Canadian dollar are the Swiss franc, Japanese Yen, the Euro, US dollar, the yen, GBP- the pound sterling, and the Australian dollar.

Earlier the currency in circulation throughout Canada was the Canadian pound which went on to become Canadian dollar in the due course due to political and economic reasons and pressures. Until 1841 Canadian Dollar was not even considered.

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Approximately 5 years and later for the next few years various discussions were taking place at all levels which revolved around adopting dollar as the official currency. Especially the local Canadian residents were in favour of adopting dollar in the place of pound because they were aspiring to gain from trades with the US which was their neighbour country with high economic growth and a fast prospering country.

Canadian population was very keen to take on board the Canadian currency with the American unit, however the authority at the helm that resided and governed from London were not really in favour of it and were keen to carry the same old currency, i.e. the pound sterling to be the singly and only mode of exchange all through the British Empire.

Immediately after 1850, i.e. in the beginning of 1851, the Canadian Legislative Council along with Assembly of Canada voted for an amendment or an act with an intention of pioneering or launching a pound sterling unit in combination with fractional coinage that was decimalized. The thought or motive behind taking this step was that the decimal coins would equate in valued to the exact amounts vis-à-vis the U.S. dollar coinage that was suppose to be fractional.

The people sitting in London who controlled the fiscal decisions however declined to consent and raised objections on technical arguments. This was the last time that the authorities at the helm in London ever enquired or asked for explanation about Canada’s internal jurisdiction.

During 1851 to bring the debate – revolving around adopting Sterling System and decimal monetary system according to US dollar – to its logical and mutually agreeable conclusion, both the Canadian Legislative Council as well as Assembly in Canada passed an act. The same was passed with an aim that the decimal coins would match up to an accurate amount vis-à-vis the US dollar coins.

Finally in 1853, a law passed by the Legislative Council and Assembly of Canada, brought gold standard in Canada, that was based on both the British gold severeign and the American gold eagle coinage.

As per the 1853 act the coins were not introduced in the Canadian economy. During this course Sterling coins were a more of exchange that got officiated and legalized and rest of the silver coins were scrapped or demonetized to be precise. The British government permitted decimal coinage in principal but did not stop hoping that their sterling would be finally chosen and be conferred upon the regal title of ‘royal’. Around 1856 and 1857 it was decided that in combination with the monetary unit of the U.S, the dollar a decimal coinage would be launched in Canada.

As a result of this act being passed, approved, and applauded by public of Canada, the new decimal coins came into the economy and market in 1858, and finally Canadian currency got to align with the U.S. Dollar.

In 1867 Canada, New Brunswick, Nova Scotia decided to come under one umbrella by way of a coalition and called it Dominion of Canada. As a result currencies of these three provinces became one.

Prince Edward Island, before becoming a part of the Dominion of Canada, in its 70th year, took on decimalization within the U.S. dollar unit and it was around the same time that 1¢ coinages were also introduced/floated in the market.

Fed Government decided to intervene in 1871 and passed Uniform Currency Act, as a result of which different currencies of different regions were replaced with one single common currency through out Dominion of Canada and it was duly called Canadian Dollar, and was represented by C$.

Earlier gold standardization was the adopted standard and currencies were measured against gold reserves. However during World War-I, situations called for a change and gold standardization was done away with for good. This happened around 1933. Then at the time of 2nd World War until around 1950s, Canadian dollar’s exchange rate continued to revolve around 1.1 against 1 USD.

For next few years, i.e. starting from 1950 until 70s, Canada continued to oscillate between fixed and floating rate of exchange. Same happened with the Canadian coins too. They also underwent several changes vis-à-vis everything starting from – shape & design, material used, to denomination. Finally by 1968 silver coins were withdrawn from market as legal mode of exchange for good. And during the same year 50 ¢ and $1 coins in nickel pure came into circulation.

Canadian coins are minted at the Royal Canadian Mint situated in Winnipeg Manitoba. At present they are issued in 1, 5, 10, 25 cents, 50¢, one dollar and 2 dollar coins. Fifty cent coins are very much there but not used too often. They have become more of a collection item and not too commonly used in everyday buying and selling and other transactions. Since they are not popular many a times authorities have also contemplated abolishing or discontinuing the coin from being circulated. Removing it from circulation will save the Royal Canadian Mint its making cost. The making of Canadian penny comes to at least C$ one hundred and thirty million every year to remain in circulation incessantly, unhindered.

After abandoning gold standards in 1931, during 1935 the Bank of Canada was formed & issued its first bank note series on March 11th. This was the year when Canada started printing its own banknotes too. The new body took over control from Dominion of Canada which till then had been looking after issuance of banknotes.

This body issued banknotes in the denomination of $1 to $500 and $1000 with $2, $5, $10, $20, $25, $50, and $100 banknotes in between. Two years later in 1937 a new series coinages were launched.

Finally during 1944, an act was passed and the licensed banks were prohibited from releasing their own currency, with the Royal Bank of Canada having released the last bank notes that were issued by any of the chartered banks.

Noteworthy changes in the design of currency notes or Canadian dollar bills have also taken place from time to time since 1935 till as recently as 2001. The next series of next in series of newly designed bills or notes will be introduced in the market sometime in 2011. The design is revealed to the public only at the time of official launch of the notes. All currency notes that are officially circulated in Canadian economy are presently printed under the direct supervision and control of the Canadian Bank Note Company along with BA Int. Inc. And this is done under contractual conformity with the Bank of Canada.

Legal Tender

Canadian dollar, released by the Bank of Canada are official mode of exchange within the country. But it may be noted that business-related dealings and contracts are also allowed to be lawfully brought to close in any approach which is mutually decided and approved of by people involved in it. It may also be taken note of that the official mode of exchange of Canadian coinage is administered by the Currency Act which outlines the limits.

Sometimes there have also been instances when the traders or merchants in Canada have declined to accept bank notes and by doing this they are not even considered breaking the governing law. Going by the legal set of guiding lines, the manner of payment is something that has got to be mutually agreed upon by the people involved in the transactions. A convenience or a daily need store have a right to decline from accepting a hundred dollar banknote if they feel that the note could be forged or an in genuine note and it could put them in legal trouble that could also result in loss of time and money.

However, there is an official policy according to which it is for the retailers to evaluate the impact and keep the consequences of that approach at the forefront before taking a stand. In a situation where there is no mutually agreed upon or a predefined mode or method of payment for the tender, they are advised to seek legal advice.

Official tender that is in circulation in Canada, i.e. the Canadian dollars – are sometimes even accepted by select businesses in the cities in the US in the north along with in several what are known as Canadian snowbird enclaves. It is same situation where the USD is accepted by select businesses based in Canada.

Value of Canadian Dollars

The Canadian dollar followed floating exchange rate from 1950 to 1962. From 1952 till ‘60, the currency was bought and sold at a slight premium over the U.S. dollar, and during this time it also managed to reach a high point of 1.0613-14 United States Dollar as at the end of third week of August 20, during 1957.

Then came 1960, and the year saw the Canadian currency take a considerable hit after this phase, and this finally lead to election defeat of the then Prime Minister John Diefenbaker. This was 1963 election time. The Canadian dollar saw a come back to its fixed exchange rate management during ‘62 and its value was decided at US$0.925.

It remained unmoved and stable on this position until 1970. And then came inflation, and to fight the overall rise in the cost of living, the Canadian dollar shifted its floating exchange rate again in 1970. And this time round it saw an upgrade in its value and it was valued more than the U.S. dollar and enjoyed a pretty good innings during the 1970s. The peak came on 25th April in 1974, when the Canadian dollar t was equalled to US$1.0443.

Again the Canadian currency went downhill against its American counterpart at the time of technological boom in the1990s and this was the time when CAD traded for a mere 61.79¢ USD. This was 21.1.2002, which was the all-time low that CAD had experienced since its inception. Since then, Canadian dollar has been growing in value consistently has been doing reasonably well against all major currencies of the world. This has been possible mainly due to high prices for commodities, with special reference to oil that Canada supplies to various nations across the globe.

The CAD’s value as compared to the U.S. dollar went up quite a bit during 2007 because of the sustained potency of the economy in Canada along with the other reason comprising the U.S. currency’s limitations and its failure in the world market platform. During 2007 in September Canadian Dollar for the first time met the U.S. greenback at equivalence after November 25, 1976. Inflation was fairly low since 1990 which impacted value of Canadian dollar adversely for a long length of time. During 2007 the Canadian dollar saw an extraordinary bounce back, and it soared 23% in value.

First time in the history of 30 years finally in 2007 in September, the Canadian dollar saw its peak against the U.S. dollar at 1.0052, from where it went on to see a hit at US$1.1024 at the time of trading, and again witnessed a high recently after China made an official announcement that it would branch out its approx 1.44 trillion United States Dollar reserve from the U.S. dollar.

However November saw the Canadian dollar come at same level with the value of the U.S. dollar, and in December the dollar had moved back to 0.98 United States Dollar, with reducing rate of interest rates implemented by the Bank of Canada because of their apprehension vis-à-vis its exports to the U.S. Canadian dollar went on to gain fame and Time magazine conferred the recognition of Canadian Newsmaker of the Year for 2007.

The Bank of Canada has hardly taken steps where Forex is concerned since 1998 with an objective of manipulating the value of Canadian dollar. However the institution is positioned in a way that if it decides to intervene, it can help CAD arrive at a value.

History substantiates the claim that on the world market platform the Canadian dollar has demonstrated a tendency that it moves hand in hand with the U.S. dollar. Since the 70s, Canadian dollar has been acknowledged as a global reserve currency. This is the time during which the currency was floated against major global currencies.

In last few years however CAD has seen some dramatic ups and downs in value which have time and again correlated with movement in prices of oil, as Canada happens to take lion’s share where oil export sector is concerned.

Because of the fundamental soundness that the Canadian Economy displays, CAD by many South American and Central Banks is considered a yardstick and a reserve currency. So much so that in the American economy, the Canadian dollar is conferred the same status that the Australian Dollar is given in the Asia Pacific province.

Canada has played an important role in restructuring finance and funding structures of Dutch, Caribbean, British, and French state economies.

Trading focusing on trading USD CAD, besides keeping an eye on exchange rate should try and dig a bit deeper for better understanding of the value of Canadian dollar against American dollar; the way it affects both the countries; the way it impacts Canadian residents; their spending curve, etc.

The increasing value of the Canadian dollar is not really a good sign for its exports. Because people who are placing orders for in Canadian goods and services, will have to pay more for them. As increased value will pinch the exporter harder he will be bound to place fewer orders which would impact income of nation adversely.

Let’s first consider the consequences faced by Canadian companies that export various goods and services and supply stuff to the United States. When we observe various business deals happening between The US and Canada we will observe that, when all the various situations remains unchanged, a rise in the value of the Canadian Dollar or on the contrary when the value of the U.S. Dollar takes a hit results in decreasing or slowing down of sales for the Canadian manufacturer which is not a good sign, or lower revenue for every sale, which again is not a very good news. The situation when considered from the other end is quite fair for Canadians who call for goods and stuff from the US.

Importing to Canada – If US dollar weakens, it is a favourable situation for Canadian imports. In Dollar-Weak situation, Canadians placing orders for buying goods from US will be required to pay less.

When the dollar is showing signs of weakening it benefits companies with foreign competitors because competitors’ goods become more expensive. When dollar weakens, another fall out may be seen in the form of rise in rate of interest. This happens because investors demand higher rates to be able to compensate against the added currency risk.

Now imagine a situation when the rate of exchange is at par, $50 American is the same as 50 Canadian dollars. In this kind of situation Canadian merchants are in a position to place orders for U.S. goods for half the price of what they were paying earlier. This is good thing for Canadian merchants, as well as Canadian end users, because as a result of this favourable exchange rate, it is likely that part of savings will be shared with the consumer.

This situation is also good news for manufacturers in America, as with this new turn, possibility of Canadian merchants to buy their goods increases, resulting in improved sales, and this entire situation has come alive because one is getting the same 100 American Dollar for every sale as they were getting earlier. The profit margin thus improves tremendously.

The above explanation discusses primary and direct impacts but however leaves out the other, that is the secondary impacts that the fluctuating rate of exchange may have, but this should help traders to clearly understand how the thing impacts exporters and importers. When value of currency goes up it hurts exporters because rise in value raises the costs of their goods in that they want to order from foreign countries. But position of importers gets better off when the cost of foreign goods has declined. When all other situations remain unchanged, an upward swing in currency value will make the imports rise and exports take a dive.

Canadian Economy & Factors Influencing the Exchange Rate of Canadian Dollar

Canada is at 14th position when we talk about large and prosperous economies. Its official legal tender is called the Canadian dollar, represented by CAD. In foreign exchange trade, it is also referred to as the Loonie. It is counted amongst major currencies. It is also called the “commodity” currency for a simple reason that the economy of Canada depends a great deal on exports of oil and other commodities. For people who are trading currencies as CAD being part of the pair then it becomes imperative for them to keep a watch on news and announcements coming out of Canada and released by Govt authorities.

Factors that might impact the currency and currency pair as a result traders should keep a watch on overnight rate changes in Bank of Canada; Change in Rate of Employment & Unemployment; Consumer as well as Producer price index represented by CPI and PPI respectively; another important factor influencing the exchange rate of CAD comprises Gross domestic product; Commerce or Trade balance; and Purchases of foreign investment or securities.

This currency is issued by the Bank of Canada, which is also responsible for developing and implementing economic and financial policies for the country. Many central banks across the world tend to treat Canadian Dollars a reserve currency. During the boom phase for technology in the 1990s that was fixed on United States – a significant dip was noticed in Canadian Dollar vis-à-vis the US Dollar. Since then it has positioned itself strongly in the international foreign exchange markets where trading happens.

Canadian dollar has seen a significant and continuous growth in value, mainly owing to prices of crude oil (of which it is amongst the biggest exporters), and a few other commodities.

Canada’s biggest business partner happens to be its neighbouring country United States of America. If market witnesses rise in oil prices, America and other countries importing oil from Canada end up paying more, and as a result value of Canadian dollar strengthens.

Canadian dollar saw a great high in the year 2007 for several reasons. One, the price of oil and its demand went up, and two, US dollar saw losing some of its sheen in the exchange market.

The Canadian dollar is often labelled as a fluctuating currency and therefore the country constantly needs to fight against it and maintain a stable economic growth rate. Because stability will help to keep up CAD’s demand and attract investors and giving them healthy economic returns.

Even though the Canadian Dollar is inclined to move along US Dollar when we are talking about the global markets, the Canadian Dollar is believed to be more firm than the USD. The rapid escalation of the Canadian Dollar lifts up the price of Canadian exports to the United States, which makes up a big part of the economy. With the increase in the value of Canadian Dollar, it becomes rather simple for the commerce within Canada circles when it comes to buying foreign material.

About USD CAD and How to Trade the Pair

USD CAD is an abbreviation for the U.S. dollar and Canadian dollar currency pair. It’s also called a cross pair. This USD CAD pair is indicative of the fact that how many Canadian dollars will be required for a trader to be able to buy one U.S. dollar. USD CAD, where USD appears in the beginning is called the base currency, while CAD that appears as a second or consecutive currency is known as the base currency.

The exchange rate of USD CAD pair gets influenced by factors which may effect either of the two countries – in conjunction with other core currencies, amongst each other, and independent of each other.

Second, while the currencies are being measured against each other, the existing rate of interest with reference to the Federal Reserve & Bank of Canada also controls the value of these currencies. Also when Federal Reserved is mediating, it is only with an aim to strengthen the value of USD.

Third, both the US and Canadian economy are closely linked and both currencies demonstrate a certain correlation with each other. CAD enjoys a positive correlation with respect to crude oil. Likewise any major announcements in US that are likely to impact US economy will impact USD CAD pair too.

Likewise USD CAD shares unfavourable correlation with pairs such as the Australian Dollar/ United States Dollar; Sterling Pound/US Dollar; & NZD/United States Dollar. The reason is – that one of the components in all the above mentioned pairs happens to be United States Dollar.

Traders trading USD CAD should ideally keep a watch on various aspects of both sides of market, the US as well as Canadian.

Trader keeping a watch on Canadian market and its economy with a view to identify, enter and exit the right trades to be able to book profits, should keep abreast of issues like International Merchandise Trade; Quarterly Gross Domestic Product Quarterly; Ivey Purchasing Managers Index; Leading Indicators; Consumer Price Index; Retail Sales; Bank of Canada Rate Decision; Bank of Canada Governor Speaks; & Rate of change in unemployment and employment.

And when the trader is keeping a watch over US market s/he should keep a her/ his mind and eyes glued to Employment vis-à-vis Non Farm Payrolls along with Rate of Unemployment; Rate Decision in relation with FOMC; Trade Balance; Total Balance in Current Account; PPI or Producer Price Index; Goods Orders (Durable); Retail Sales Advance; any kind of public announcements done by Federal Reserve President; Net of Purchases related to Foreign Security; GDP; Confidence of the End User or Consumer; ISM Manufacturing; Phil Fed Survey; Univ. of Michigan CSI, i.e. Consumer Sentiment Index; Consumer Price Index.

The price of oil does not only affect the economy in a big way abut also at a micro level because of the way it is used. Oil price fluctuations could occur as a result of economic, geographical, or/and natural conditions.

In case of the US and Canada, oil has many a times proved to be the biggest driver of the economies.

Canada has huge oil reserves and happens to be a big oil exporter worldwide. Whereas the US is a big oil consumer, and meets most of its oil requirement through Canada. This makes the economies of the two countries closely interlinked.

Past few years have witnessed a peculiar situation in USD CAD pair vis-à-vis oil prices. It’s called the Inverse Correlation. Going by the theory, when there is a rise in prices of oil; drop is seen in the rate of US Dollar against Canadian Dollar. This makes the long USD CAD trade the perfect safe guard against the rising price of oil.

In future if for some reason oil prices fall, then Canadian economy will get hit badly. As a result of falling economy the Canadian dollar will weaken against the US dollar’s value which will go on an improving spree. Falling oil prices will benefit the US economy.

As oil prices are falling, even though oil is priced in US dollars, the currency will not suffer because majority of central banks have USD as reserve. This is the precise reason why the US dollar does not impact on the profit straight when oil prices are rising.

Trading the US dollar/Canadian dollar At the End of Every Month

It will benefit traders to know that United States of America is one of the largest consumers and importers of products supplied by and manufactured in Canada. America imports crude oil, building material et al. This kind of merchandise totals up to a few thousand dollars and more are paid when the month is nearing its end. Meaning at the close of every month these dues are settled.

To be date precise the accounts for these imported products are closed and paid in full or part as agreed between the twenty third and twenty eighth of every month. And each and every end of a month, during such a time Canadian dollars have a peculiar tendency to rise against the US dollars for a simple reason that this is the time span when the US will be required to buy Canadian dollars to be able to make payments for those products that they have got from Canada. When a country buys another country’s’ currency in bulk, the value of the country’s’ currency from which it is bought will go up, in our case it is Canadian currency.

Whose value will rise since America would be buying this currency in bulk to be able to pay them for the imports.

What a trader should do is learn to identify solid technical ground and enter a SHORT position on the pair to take advantage of this kind of situation. Such a rally in general comes and goes within two days.

As trader observes the first +100pips, he should go ahead and book some profits, and then let the rally continue. And this tip can be used not just with USD CAD pair but also with other related pairs like Canadian Dollar and Swiss Franc, Pound Sterling and Canadian Dollar, CAD/JPY, and Euro and Canadian Dollar where one of the currencies is CAD. A special note for traders who are on a losing spree and have been losing most of their trades, they should take advantage of this sturdy and elementary logic and situation and at the end of every month make free pips between the dates mentioned above.

Other details traders will require to know are as follows: USD CAD broker spread ranges between 2-4 pips; the most happening and active time to trade this pair is the US session; and the most potent and active trading hours fall between 12:00 -17:30 GMT; Average daily high and low range is 106 pips; Traders should at least have some experience on trading before they take on this pair, an absolute novice will do himself good by avoiding to trade this pair. Once he gets some exposure in real time trading with simpler pairs, he can give this pair a try; Value of one pip in USD CAD pair is variable.

Trend Trading USD CAD Pair

Oil prices have a direct and solid impact on some currencies. Two currencies that have a strong correlation to price of oil are the Canadian Dollar and GBP. When price of oil goes up, CAD goes on a rising spree for several months. It ahs been observed that oil prices trend consecutively for some months. Canada being one of the major oil exporters to the United States, official tender of Canada, CAD becomes very sensitive to any changes of price of oil.

As we know that America gets most of its required quote of oil from Canada, which helps the Canadian dollar to improve its worth in relation to the USD. This type of phenomenon suggests that the USD CAD currency pair should ideally start trending down in the situation arises when consumption of oil within the US economy rises for any reason whatsoever. Traders can take advantage of this trend trading strategy with USD CAD pair when he is able to identify and confirm the fact that demand from US for oil imports from Canada has gone up. This strategy – trend trading is based on a tool called Channel Commodity Index (CCI).

This trend trading strategy for USD CAD gets success provided there is an increase in oil prices and the exchange rate of currency pair USD CAD is nose-diving. The phenomenon will also occur at the time when oil prices are going down and the USD CAD rate is moving upwards. Let us assume that the price of oil is going up and the exchange rate for currency pair USD CAD is hitting a low. This situation is quite a possibility in the real trading world. 2008 was the year when the oil prices shot up from approximately $55-70 for every barrel to an astounding $140- $150 per barrel. This was a trend that continued to show its colors for some months at a stretch.

Traders need to keep a close watch on the time. They should mark when the fourteen period Consumer Index surpasses the 100 mark and then crosses back below 100. This is for a trader to understand that the buyers did enter the market with the hope but eventually gave up. Now this is the time pocket where one can short USD CAD. Traders should enter the short trade by placing a limit order of around say three hundred pips and a place a SL at 75 pips. It’s a 1:4 risk reward ratio and not a bad one at that plus this helps a trader as he does not get out of the market at a slight retracement.

USD CAD is a less volatile currency pair, and blends rather well with CCI indicator. The CCI, or the Consumer Confidence Index, is known to react sharply to price movement. This in turn paces up release of trading signals. And USD CAD due to its basic nature is suitable for being traded in conjunction with CCI indicator.

And when the trader is keeping a watch over US market s/he should keep a her/ his mind and eyes glued to Employment vis-à-vis Non Farm Payrolls along with Rate of Unemployment; Rate Decision in relation with FOMC; Trade Balance; Total Balance in Current Account; PPI or Producer Price Index; Goods Orders (Durable); Retail Sales Advance; any kind of public announcements done by Federal Reserve President; Net of Purchases related to Foreign Security; GDP; Confidence of the End User or Consumer; ISM Manufacturing; Phil Fed Survey; Univ. of Michigan CSI, i.e. Consumer Sentiment Index; Consumer Price Index.