The Canadian dollar (symbol: $; code: CAD) is the currency of Canada. It is abbreviated with the dollar sign $, or sometimes C$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents.
In 1841, the Province of Canada adopted a new system based on the Halifax rating. The new Canadian pound was equal to four US dollars (92.88 grains gold), making one pound sterling equal to 1 pound, 4 shillings, and 4 pence Canadian. Thus, the new Canadian pound was worth 16 shillings and 5.3 pence sterling.
The 1850s was a decade of wrangling over whether to adopt a sterling monetary system or a decimal monetary system based on the US dollar. The local population, for reasons of practicality in relation to the increasing trade with the neighbouring United States, had a desire to assimilate their colonial currency with the American unit, but the imperial authorities in London still preferred sterling as the sole currency throughout the British Empire. In 1851, the Legislative Council and the Legislative Assembly passed an act for the purposes of introducing a pound sterling unit in conjunction with decimal fractional coinage. The idea was that the decimal coins would correspond to exact amounts in relation to the U.S. dollar fractional coinage.
As a compromise, in 1853 an act of the Legislative Council and Assembly of the Province of Canada introduced the gold standard into the colony, based on both the British gold sovereign and the American gold eagle coins. This gold standard was introduced with the gold sovereign being legal tender at £1 = US$4.86 2⁄3. No coinage was provided for under the 1853 act. Sterling coinage was made legal tender and all other silver coins were demonetized. The British government in principle allowed for a decimal coinage but nevertheless held out the hope that a sterling unit would be chosen under the name of "royal". However, in 1857, the decision was made to introduce a decimal coinage into the Province of Canada in conjunction with the U.S. dollar unit. Hence, when the new decimal coins were introduced in 1858, the colony's currency became aligned with the U.S. currency, although the British gold sovereign continued to remain legal tender at the rate of £1 = 4.86 2⁄3 right up until the 1990s. In 1859, Canadian colonial postage stamps were issued with decimal denominations for the first time.
In 1861, the colonies of New Brunswick and Nova Scotia followed the colony of Canada in adopting a decimal system based on the U.S. dollar unit. In the following year, Canadian colonial postage stamps were issued with the denominations shown in dollars and cents.
Newfoundland went decimal in 1865, but unlike the Province of Canada, New Brunswick, and Nova Scotia, it decided to adopt a unit based on the Spanish dollar rather than on the U.S. dollar, and there was a slight difference between these two units. The U.S. dollar was created in 1792 on the basis of the average weight of a selection of worn Spanish dollars. As such, the Spanish dollar was worth slightly more than the U.S. dollar, and likewise, the Newfoundland dollar, until 1895, was worth slightly more than the Canadian colonial dollar.
In 1867, the colonies of Canada, New Brunswick, and Nova Scotia were united in a federation called the Dominion of Canada and the three currencies were merged into the Canadian dollar.
In 1871, Prince Edward Island went decimal within the U.S. dollar unit and introduced coins for 1¢. However, the currency of Prince Edward Island was absorbed into the Canadian system shortly afterwards, when Prince Edward island joined the Dominion of Canada in 1873.
The Canadian Parliament passed the Uniform Currency Act in April 1871, tying up loose ends as to the currencies of the various provinces and replacing them with a common Canadian dollar. The gold standard was temporarily abandoned during the First World War and definitively abolished on April 10, 1933. At the outbreak of the Second World War, the exchange rate to the U.S. dollar was fixed at C$1.10 = US$1.00. This was changed to parity in 1946. In 1949, sterling was devalued and Canada followed, returning to a peg of C$1.10 = US$1.00. However, Canada allowed its dollar to float in 1950, whereupon the currency rose to a slight premium over the U.S. dollar for the next decade. But the Canadian dollar fell sharply after 1960 before it was again pegged in 1962 at C$1.00 = US$0.925. This was sometimes pejoratively referred to as the "Diefenbuck" or the "Diefendollar", after the then Prime Minister, John Diefenbaker. This peg lasted until 1970, after which the currency's value has floated.