a history of the canadian dollar - return to a floating rate

Return to a Floating Rate

(June 1970-present)

71A History of the Canadian Dollar

Rising domestic inflation led to the estab-lishment of the Prices and Incomes Commission in1968 and to the introduction of a restrictive stanceon monetary policy. This occurred at a time whenthe United States was pursuing expansionarypolicies associated with the Vietnam War and witha major domestic program of social spending.Higher commodity prices and strong externaldemand for Canadian exports of raw materials andautomobiles led to a sharp swing in Canada’scurrent account balance, from a sizable deficit in1969 to a large surplus. Combined with sizablecapital inflows associated with relatively moreattractive Canadian interest rates, this put upwardpressure on the Canadian dollar and on Canada’sinternational reserves. The resulting inflow offoreign exchange led to concerns that the

government’s anti-inflationary stance might becompromised unless action was taken to adjust thevalue of the Canadian dollar upwards.90 Therewas also concern that rising foreign exchangereserves would lead to expectations of a currencyrevaluation, thereby encouraging speculativeshort-term inflows into Canada.

On 31 May 1970, Finance Minister EdgarBenson announced that

for the time being, the Canadian Exchange Fund willcease purchasing sufficient U.S. dollars to keep theexchange rate of the Canadian dollar in the marketfrom exceeding its par value of 92½ U.S. centsby more than one per cent (Department ofFinance 1970).

Bank of Canada $50, 1975 seriesThis note was part of the fourth series issued by the Bank of Canada. Thismulticoloured series incorporated new features to discourage counterfeiting.While Canadian scenes still appeared on the backs (this note shows the“Dome” formation of the RCMP Musical Ride), there was more emphasison commerce and industry. The Queen appeared on the $1, $2, and $20notes. Others carried portraits of Canadian prime ministers.

90. Consumer prices were rising at about 4 to 5 per cent through 1969 and early 1970. Wage settlements were also rising, touching 9.1 per cent during thefirst quarter of 1970.

72 A History of the Canadian Dollar

Canadian authorities also informed the IMFof their decision to float the Canadian dollar andof their intention to resume the fulfillment of theirobligations to the Fund as soon as circumstancespermitted. The Bank of Canada concurrentlylowered the Bank Rate from 7.5 per cent to 7 percent, an action aimed at making foreign borrowingless attractive to Canadian residents and atmoderating the inflow of capital, which had beensupporting the dollar.

The government made the decision to floatthe Canadian dollar reluctantly. But Bensonbelieved that there was little choice if the govern-ment was to bring inflation under control. Hehoped to restore a fixed exchange rate as soon aspossible but was concerned about a premature pegat a rate that could not be defended.

As in 1950, other options were consideredbut rejected. A defence of the existing par valuewas untenable since it could require massiveforeign exchange intervention, which would bedifficult to finance without risking a monetaryexpansion that would exacerbate exist inginflationary pressures. A new higher par value wasrejected, since it might invite further upwardspeculative pressure, being seen by market partici-pants as a first step rather than a once-and-for-allchange. Widening the fluctuation band around theexisting fixed rate from 2 per cent to 5 per centwas rejected for the same reason (Beattie 1969).The authorities also considered asking the UnitedStates to reconsider Canada’s exemption from theU.S. Interest Equalization Tax. Application of thetax to Canadian residents would have raised thecost of foreign borrowing and, hence, would havedampened capital inflows. This, too, was rejected,however, because of concerns that it wouldnegatively affect borrowing in the United States byprovincial governments (Lawson 1970a).

While recognizing the need for a significantappreciation of the Canadian dollar, the Bank ofCanada saw merit in establishing a new par value

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at US$0.95 with a wider fluctuation band of±2 per cent (Lawson 1970b). A new fix was seenas being more internationally acceptable than atemporary float, and since the lower interventionlimit of about US$0.9325 would have been thesame as the prevailing upper intervention limit,such a peg would have been accepted by academicswho favoured a crawling peg. A new peg was alsoviewed as desirable because it would preserve anexplicit government commitment to the exchangerate consistent with its obligations to the IMF.There was also some concern that a floatingexchange rate might “encourage, as it had in thelate 1950s, an unsatisfactory mix of financialpolicies” (Lawson 1970a).

For its part, the IMF urged Canada toestablish a new par value. Fund management wasconcerned about the vagueness of Canada’scommitment to return to a fixed exchange rate,fearing that the float would become permanent asit had during the 1950s. The IMF also feared thatCanada’s action would increase uncertainty withinthe international financial system and would havebroader negative repercussions for the BrettonWoods system, which was already under consider-able pressure. Canadian authorities declined to seta new fix, emphasizing the importance of retainingadequate control of domestic demand for thecontinuing fight against inflation.

The dollar in the 1970sImmediately 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. Itcontinued to drift upwards through the autumn of1970 and into 1971 to trade in a relatively narrowrange between US$0.98 and US$0.99. By 1972, theCanadian dollar had traded through parity with itsU.S. counterpart. It reached a high of US$1.0443on 25 April 1974.

The strength of the Canadian dollarthrough this period can largely be attributed tostrong global demand, which boosted the prices ofraw materials. There were also large inflows offoreign capital, partly reflecting the view thatCanada’s balance of payments was expected to beless affected by the tripling of oil prices thatoccurred through 1973 than that of other majorindustrial countries, since it was only a small netimporter of oil.

During the early 1970s, the dollar’s strengthwas also due to the general weakness of the U.S.currency against all major currencies as the BrettonWoods system of fixed exchange rates collapsed.With the U.S. balance-of-payments deficit wideningto unprecedented levels, the U.S. governmentsuspended the U.S. dollar’s convertibility into goldon 15 August 1971 and imposed a 10 per centsurcharge on eligible imports. This action followeda series of revaluations of major currencies. On18 December 1971, the major industrial countriesagreed (the Smithsonian Agreement) to a newpattern of parities for the major currencies(excluding the Canadian dollar) with a fluctuationband of ±2.25 per cent. The U.S. dollar was also


devalued by 8.57 per cent against gold, although itremained inconvertible. This last-ditch attempt tosave the Bretton Woods system failed. By 1973,all major currencies were floating against theU.S. dollar.

The strength of the Canadian dollar againstits U.S. counterpart during this period concernedthe authorities, who feared the impact of a higherdollar on Canada’s export industries at a time ofrelatively high unemployment. Various measures torectify the problem were examined but dismissedas being either unworkable or harmful. Theseincluded the introduction of a dual exchange ratesystem, the use of moral suasion on the banks tolimit the run-down of their foreign currency assets,and government control of the sale of new issuesof Canadian securities to non-residents. None ofthese options was ever pursued (Government ofCanada 1972). However, under the WinnipegAgreement, reached on 12 June 1972, charteredbanks agreed, with the concurrence of the ministerof finance, to an interest rate ceiling on large,short-term (less than one year) deposits. Thepurpose of the agreement was to reduce “theprocess of escalation of Canadian short-terminterest rates” (Bank of Canada Annual Report1972, 15). Lower Canadian short-term interest ratesand narrower rate differentials with the UnitedStates helped to relieve some of the upwardpressure on the Canadian dollar.


Introduction of monetary targetsIn reaction to “stagflation,” the combination ofhigh unemployment and inflation that prevailedduring the early 1970s, most major economies,including Canada, embraced “monetarism.”Based on work by Milton Friedman, who arguedthat inflation was always and everywhere amonetary phenomenon, it was maintained thatby targeting a gradual deceleration in the growthof money, inflation could be brought undercontrol with minimal cost. Accordingly, in 1975,the Bank of Canada adopted a target for thegrowth of M1, a narrow monetary aggregate,which it hoped, if met, would gradually squeezeinflation out of the system. Money growthwould subsequently be set at a rate that wouldbe consistent with the real needs of theeconomy, but would also ensure price stabilityover the long run. While appealing in theory,monetarism failed in practice. Despite the Bankof Canada hitting its money-growth targets,inflation failed to slow as expected. Monetarytargets were abandoned in Canada in 1982. Seepage 77 for more details.

Monetary policy was also more accom-modative than it should have been through thisperiod, as the Bank of Canada sought to moderatethe upward pressure on the currency and tosupport aggregate demand as the global economyslowed because of the oil-price shock. Inhindsight, the Bank failed to “recognize the extentto which the economy in general and the labourmarket in particular were coming under strain”(Bank of Canada Annual Report 1980, 17). In otherwords, the Canadian economy was operating closerto its capacity limits than was earlier believed. Fiscalpolicy was also very expansionary through thisperiod. While the 1974–75 slowdown in Canadawas relatively shallow compared with that in theUnited States, where policy was less accommoda-tive, inflationary pressures intensified.

To address these inflationary pressures, ananti-inflation program, including wage and pricecontrols, was introduced by the government in late1975, and the Bank of Canada adopted a target forthe narrow monetary aggregate, M1, with theobjective of gradually reducing the pace of moneygrowth and thus inflation. After weakeningtemporarily in 1975 and falling below parity withthe U.S. dollar, the Canadian dollar recovered in1976. Wide interest rate differentials with theUnited States provided considerable support for thecurrency, with provinces, municipalities, andCanadian corporations borrowing extensively inforeign capital markets. Foreign appetite forCanadian issues was enhanced by the removal in1975 of the 15 per cent federal non-resident

withholding tax on corporate bonds of five yearsand over. Foreign borrowing helped to mask theeffects of deteriorating Canadian economicfundamentals on the Canadian dollar.

The currency moved up to the US$1.03level during the summer of 1976 in volatile trading,but the election of a Parti Québécois governmentin Quebec on 15 November 1976 promptedmarkets to make a major reassessment of theCanadian dollar’s prospects. Political uncertainty,combined with softening prices for non-energycommodities, concerns about Canada’s externalcompetitiveness related to rising cost and wagepressures, and a substantial current account deficit,sparked a protracted sell-off of the dollar.


Canada, $1, Trudeau just-a-buck, 1972This example of “political currency” satirizes formerPrime Minister Pierre Trudeau and was circulated duringthe campaign of 1972 prior to his second term in office.


Over the next two years, the Canadiandollar fell significantly, declining to under US$0.84by the end of 1978. This occurred even though theU.S. dollar was itself depreciating against othermajor overseas currencies and despite considerableexchange market intervention by the Bank ofCanada on behalf of the federal government tosupport the Canadian dollar. To help replenish itsinternational reserves, the federal governmentestablished a US$1.5 billion stand-by line of creditwith Canadian banks in October 1977. This facilitywas increased to US$2.5 billion the following April.A similar US$3 billion facility was organized inJune 1978 with a consortium of U.S. banks. Thefederal government also borrowed extensively inNew York and in the German capital market toassist in financing the current account deficit andto support the currency. The Bank of Canadatightened monetary policy through 1978, with theBank Rate rising by 375 basis points to 11.25 percent by the beginning of January 1979. Early in1979, the federal government undertook additionalforeign borrowings, this time in the Swiss andJapanese capital markets.

Notwithstanding the tightening in monetarypolicy, inflation pressures did not abate, eventhough the rate of monetary expansion was keptin line with announced targets, and the Bank Ratetouched 14 per cent by the end of 1979. Againstthis backdrop, however, the Canadian dollarsteadied and ended the year close to US$0.86.

The dollar in the 1980sThroughout the 1980s, the Canadian dollar

traded in a wide range, weakening sharply duringthe first half of the decade, before staging a strongrecovery during the second half. Early in theperiod, the Bank’s policy was to moderate theeffects of large swings in U.S. interest rates onCanada, taking some of the impact on interest ratesand some on the exchange rate (Bank of CanadaAnnual Report 1980). For the Bank to react in thisway, it needed more flexibility, and in March 1980,


the Bank Rate was linked to the rate for three-month treasury bills, which was established at theweekly bill auction.91 Canadian short-term interestrates rose sharply through 1980 and into thesummer of 1981, with the Bank Rate touching anall-time high of 21.24 per cent in early August1981, before moderating through the remainder ofthe year. At the same time, the Canadian dollarcame under significant downward pressure.Important factors behind its depreciation includedpolitical concerns in the lead up to the Quebecreferendum in May 1980, weakening prices fornon-energy commodities, and the introduction ofthe National Energy Program by the federalgovernment in October 1980, which prompted awave of takeovers of foreign-owned firms byCanadian-owned firms, particularly in the oil sector.By mid-1981, policy-makers became concerned thatthe exchange rate slide would begin to feed onitself. Consequently, the minister of finance askedthe chartered banks to reduce their lending tofinance corporate takeovers that would involveoutflows of capital from Canada.

Nevertheless, confidence in the Canadiandollar continued to erode through 1982 onconcerns about the commitment of Canadianauthorities to an anti-inflationary policy stance, andthe cancellation of a number of large energyprojects. With the dollar falling below US$0.77,the Bank of Canada allowed short-term interestrates to rise to prevent the increasing weaknessof the Canadian dollar “from turning into aspeculative rout” (Bank of Canada Annual Report

1982, 20). The Bank also reluctantly announced inNovember 1982 that it would no longer target M1in its fight against inflation. Among other things,financial innovation had undermined the linkbetween money growth and inflation. Research alsorevealed that the small changes in interestrates needed to keep money growth on trackwere insufficient to really affect prices or output.In testimony before the House of CommonsFinance Committee, Governor Bouey said “We didnot abandon M1, M1 abandoned us” (House ofCommons 1983, 12). In other words, narrowmoney growth had failed to provide a reliablemonetary anchor.

While the currency recovered to aboutUS$0.82 on the Bank of Canada’s actions and onpositive market reaction to the introduction of arestrictive budget by the federal government, therespite proved to be short-lived. Although for themost part, the Canadian dollar held its own againstits U.S. counterpart through 1983, it weakenedsharply in 1984 and the first half of 1985, as didother major currencies, as funds were attracted tothe United States by high interest rates andrelatively favourable investment opportunities.

In September 1985, amid growing concernsabout global external imbalances and speculativepressures in favour of the U.S. dollar, the G-5 majorindustrial countries agreed in the Plaza Accord tobring about an orderly depreciation of the U.S.dollar through a combination of more forcefulconcerted exchange rate intervention and domestic


91. The Bank Rate had previously been set in this manner between late 1956 and early 1962.

policy measures. Although the overseas currenciesbegan to appreciate against the U.S. dollar, theCanadian dollar continued to depreciate against itsU.S. counterpart on concerns about weakeningeconomic and financial prospects in Canada andfalling commodity prices. The failure of twosmall Canadian banks—the Canadian CommercialBank and the Northland Bank—may have alsotemporarily weighed against the Canadian dollar.

After touching a then-record low of US$0.6913on 4 February 1986, the dollar rebounded, following


The Plaza and Louvre AccordsNamed after the Plaza Hotel in New York, thePlaza Accord was a 1985 agreement amongFrance, West Germany, Japan, the United States,and the United Kingdom aimed at correcting largeexternal imbalances among major industrialcountries and resisting protectionism. In additionto encouraging an orderly depreciation of the U.S.dollar, each country agreed to specific policymeasures that would boost domestic demand incountries with a surplus, notably Japan and WestGermany, and increase savings in countries withdeficits, especially the United States. Two yearslater in Paris, the G-5 countries, along withCanada, agreed to intensify their economic policycoordination in order to promote more balancedglobal growth and to reduce existing imbalances.It was also agreed that currencies were nowbroadly in line with economic fundamentals andthat further exchange rate shifts would be resisted.The success of policy coordination amongindustrial countries remains a hotly debated issue.While global protectionist pressures were averted,overly expansionary policy in Japan contributed toa speculative bubble in asset prices that subse-quently collapsed, causing considerable and lastingdamage to the Japanese economy. The ability ofconcerted exchange rate intervention to influencethe value of the U.S. dollar has also been thesubject of considerable controversy.



a concerted strategy of aggressive intervention inthe foreign exchange market, sharply higher interestrates, and the announcement of large foreignborrowings by the federal government. Initiallystabilizing at about US$0.72, the dollar began anupward trend against the U.S. dollar, which lastedthrough the remainder of the decade.

In February 1987, Canada joined othermajor industrial countries in the Louvre Accordaimed at intensifying policy coordination among themajor industrial countries and stabilizing exchangerates. Pursuant to this Accord, Canada participatedon several occasions in joint interventions tosupport the U.S. dollar against the German markand the Japanese yen. Although the Canadiandollar dipped briefly following the stock market“crash” in October—the Toronto Stock Exchange(TSE) fell 17 per cent over a two-day period—itquickly recovered.

Through 1988 and 1989, the currencycontinued to strengthen owing to various factors,including a buoyant economy led by a rebound incommodity prices, expansionary fiscal policy atboth the federal and provincial levels, and asignificant tightening of monetary policy aimed atcooling an overheating economy and reducinginflationary pressures. Positive investor reaction tothe signing of the Free Trade Agreement (FTA)with the United States in 1988 also supported thecurrency.92 The Canadian dollar closed the decadeat US$0.8632.

The dollar in the 1990sWhile the Canadian dollar began the 1990s

on a strong note, it weakened against its U.S.counterpart through much of the decade, decliningfrom a high of US$0.8934 on 4 November 1991to close the decade at US$0.6929.

Through 1990 and most of 1991, theCanadian dollar climbed against its U.S. counterpart(and against major overseas currencies). This waslargely due to a further tightening of monetarypolicy within the context of inflation-reductiontargets announced in February 1991, and wideninginterest rate differentials that favoured Canadianinstruments.

After cresting in the autumn of 1991 at itshighest level against the U.S. dollar since the late1970s, the Canadian dollar began to depreciate,falling sharply through 1992 to close the year atUS$0.7868. The gradual, but sustained decline inthe value of the Canadian dollar, which continuedthrough 1993 and 1994, reflected various factors.With inflation falling to—and for a time below—the target range established in 1991 and withsignificant unused capacity in the economy, theBank of Canada sought easier monetary conditionsthrough lower interest rates. Downward pressure onthe currency also reflected increasing concernabout persistent budgetary problems at boththe federal and provincial levels, softeningcommodity prices, and large current account deficits.

92. The appreciation of the Canadian dollar following the signing of the FTA gave rise to a myth at that time that the Canadian government had secretlyagreed to engineer a higher value for the Canadian dollar as a quid pro quo for the free trade agreement with the United States.

The international environment was also unfavourable.The Exchange Rate Mechanism in Europe cameunder repeated attack through 1992 and 1993,followed by rising U.S. interest rates through 1994.The Mexican peso crisis of 1994 and early 1995also drew investor attention to the weakness ofCanada’s fundamentals, especially its large fiscal andcurrent account deficits.

A degree of stability in the Canadian dollarwas temporarily re-established through 1995 and1996 for a number of reasons. These includedhigher short-term interest rates (at least early in theperiod), evidence that fiscal problems were beingresolved, a marked improvement in Canada’sbalance of payments, partly because of strength-ening commodity prices, and a diminished focus onconstitutional issues. The Canadian dollar traded ina relatively narrow range close to US$0.73 throughmuch of this period.

Renewed weakness in the currency beganto emerge in 1997 and became increasingly apparentin 1998, despite strong domestic fundamentals—very low inflation, moderate economic growth, andsolid government finances. Once again, the slide ofthe currency could be partly attributed to external


Introduction of inflation targetsIn February 1991, the government and the Bankof Canada set out a path for inflation reduction,with the objective of gradually loweringinflation, as measured by the consumer priceindex (CPI), to 2 per cent, the midpoint of a1 to 3 per cent target range, by the end of 1995.An explicit commitment to an inflation targetprovided a nominal anchor for policy, helped toshape market expectations about future inflation,and improved central bank accountability. Thetarget range of 1 to 3 per cent was subsequentlyextended on three occasions to the end of 2006.With much of the short-run movement inthe CPI caused by transitory fluctuations inthe prices of a few volatile components(e.g., gasoline), the Bank focuses, for operationalpurposes, on a measure of core CPI inflationthat excludes eight of the most volatile compo-nents of the CPI and adjusts the rest to removethe impact of changes in indirect taxes.


factors in the form of lower commodity prices.Commodity prices began to soften in the summerof 1997 but subsequently weakened significantly,owing to a financial and economic crisis inemerging markets in Asia. In this regard, the weakerCanadian dollar acted as a shock absorber andhelped to mitigate the impact of lower commodityprices on aggregate demand and activity in Canada.

The large negative interest rate differentialsthat had earlier opened up between Canadian andU.S. financial instruments also weighed against theCanadian dollar, as did the U.S. dollar’s role as asafe-haven currency during times of internationalcrisis. Rising U.S. equity prices, reflecting a pickupin productivity growth and large capital flowsinto the high-technology sector, were anotherbackground factor that supported the U.S. currencyagainst all others, including the Canadian dollar.This factor persisted though the rest of the decade.

During the summer of 1998, the crisis inemerging-market economies widened and intensi-fied with a debt default by Russia and growingconcerns about a number of Latin American coun-tries. The Canadian dollar touched a low ofUS$0.6311 on 27 August 1998, before recoveringsomewhat following aggressive action by the Bankof Canada, including a 1 percentage point increasein short-term interest rates and considerableintervention in the foreign exchange market. Whilea lower Canadian dollar was not surprising, giventhe weakness in global commodity prices, theauthorities had become concerned about increased

risk premiums on Canadian-dollar assets and apotential loss of confidence on the part of holdersof Canadian-dollar financial instruments. Interestrate reductions by the Federal Reserve Bank and


Exchange market interventionThe Bank of Canada last intervened in the for-eign exchange market on behalf of thegovernment on 27 August 1998. Up to thispoint, Canada’s policy had been to intervenesystematically to resist, in an automatic fashion,significant upward or downward pressure on theCanadian dollar. In September 1998, the policywas changed as intervention to resist movementsin the exchange rate caused by fundamentalfactors was ineffective. Neither the governmentnor the Bank of Canada target a particular levelfor the currency, believing that the value of theCanadian dollar is best set by the market. Overtime, the value of the Canadian dollar isdetermined by economic fundamentals. Canada’scurrent policy is to intervene in a discretionarymanner in foreign exchange markets only onthe most exceptional basis, such as periodsof market breakdown, or extreme currencyvolatility. For more information, see the Bank ofCanada’s website at www.bankofcanada.ca.

the return of a modicum of stability in financialmarkets following action by the Federal Reserve tocalm markets after the collapse of Long-TermCapital Management (LTCM), permitted the Bankof Canada to reduce Canadian interest rates withoutundermining confidence in the Canadian dollar.93

The final year of the decade saw theCanadian dollar recouping some of its earlier lossesagainst the U.S. dollar as the international financialsituation improved, and investors focused onCanada’s strong economic fundamentals, includinga narrowing current account deficit and strength-ening global commodity prices.

The dollar in the 21st centuryThe Canadian dollar resumed its weakening

trend in 2000 and 2001, and touched an all-time lowof US$0.6179 on 21 January 2002. Through much ofthis period, the U.S. currency rose against all majorcurrencies, reaching multi-year highs, supported bylarge private capital flows in the United States owingto continued robust U.S. growth and further strongproductivity gains. A decline in commodity prices in2001, caused by an abrupt slowdown of the globaleconomy, led by the United States, also underminedthe Canadian currency. In addition, markets weretemporarily roiled by the terrorist attacks in theUnited States on 11 September.

In this economically and politically uncertainenvironment, central banks around the world loweredinterest rates to support demand and provide liquidityto markets. The Bank of Canada reduced short-terminterest rates by 375 basis points through 2001 andearly 2002.

Through 2002, the Canadian dollar stabilizedand then began to recover as the global economypicked up and as the U.S. dollar started to weakenagainst other currencies. It appreciated sharplythrough 2003 and 2004, peaking at over US$0.85 inNovember 2004, a level not seen for thirteen years.This was a trough-to-peak appreciation of roughly38 per cent in only two years. The Canadian dollar’s


93. LTCM was a well-respected hedge fund that included on its board two Nobel-Prize-winning economists, Myron Scholes and Robert Merton. It washighly leveraged, with assets of about US$130 billion on a capital base of about US$5 billion. The fund incurred large losses on trades in the swap,bond, and equity markets that occurred when market liquidity dried up and spreads between government bonds and other instruments unexpectedlywidened sharply. LTCM also incurred losses on its portfolio of Russian and other emerging-market debt following the Russian default.

Editorial cartoon, 26 February 2002, Bruce MacKinnon/artizans.com

rise reflected a robust global economy, led by theUnited States and emerging Asian markets(particularly China), which boosted the prices ofCanada’s commodity exports. As well, growinginvestor concerns about the widening U.S. currentaccount deficit, undermined the U.S. unit against allmajor currencies. While the Canadian dollar settledback somewhat during the first half of 2005 as theU.S. dollar rallied modestly against all currencies,

underpinned by rising U.S.-dollar interest rates, itbegan to strengthen again through the summer,supported by rising energy prices. Strengtheningagainst all major currencies, the Canadian dollartouched a high of US$0.8630 on 30 September 2005.In late October, it was trading for the most part ina US$0.84–0.85 range, off its earlier highs as energyprices retreated.


Bank of Canada, $20, 2004The Canadian Journey series is the sixth note issue by the Bank ofCanada. It features the same portraits and strong identifyingcolours that appeared on the previous series, but incorporatesimages that reflect Canadian values and achievements. The backof this note illustrates the theme of Canadian arts and culturewith works by Canadian artist Bill Reid that feature Haida images.

Editorial cartoon, 5 May 2005, Bruce MacKinnon/artizans.com


Chart 6Canadian Dollar in Terms of the U.S. Dollar

Monthly averages (1970–2005)

A: 25 April 1974: Canadian-dollar recent high US$1.0443B: 4 February 1986: US$0.6913C: 4 November 1991: US$0.8934D: 27 August 1998: US$0.6311E: 21 January 2002: All-time Canadian-dollar low US$0.6179F: 30 September 2005: US$0.8630

Source: Bank of Canada

1. 31 May 1970: Canadian dollar floated2. December 1971: Smithsonian Agreement3. March 1973: Collapse of Bretton Woods system4. 15 November 1976: Election of Parti Québécois in Quebec5. 20 May 1980: Quebec Referendum6. October 1980: National Energy Program introduced7. September 1985: Plaza Accord8. February 1987: Louvre Accord9. 3 June 1987: Meach Lake Constitutional Accord10. 26 June 1990: Ratification of Meach Lake Constitutional Accord fails11. 26 October 1992: Defeat of Charlottetown Accord12. December 1994: Mexican crisis begins.13. 30 October 1995: Quebec Referendum14. July 1997: Asian crisis begins.15. 12 August 1998: Russian default crisis begins.16. 11 September 2001: Terrorist attacks in the United States

a history of the canadian dollar - return to a floating rate

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