With the decline in oil prices, the falling loonie has had quite the year so far in 2016.

In early 2016, the Canadian dollar hit the lowest it has been since 2003, when it closed at 71.02 cents US. As oil prices slowly began climbing, the Canadian dollar did too, reaching 77.55 cents US in June 2016.

This was, of course, before the Brexit vote. The shock decision by the United Kingdom to leave the European Union saw the Canadian currency decline by 1.8 per cent. Moreover, the yield on Canadian bonds fell by 16 points.

CWF_Exchange_Rate_AUG2016

While numerous global factors impact the Canadian dollar, oil prices are central to any forecast about the loonie. The World Bank has raised its forecast for crude prices to US$ 43 per barrel due to strong demand and supply shocks (including the Fort McMurray fire and sabotage of oil infrastructure in Nigeria). However, the Bank highlighted that the oversupply in the global oil market would take some time to diminish.

As the changing markets continue to affect the loonie’s climb and fall, we will continue to watch how the Canadian dollar fares.


Spotlight on the Canadian dollar

Loonie: The one dollar coin got its unusual name because of the common loon pictured on the coin. The bird is also the official bird of Ontario. The coin was introduced in 1987.

Toonie: The two dollar coin bears the image of a polar bear (officially named Churchill). It is called the toonie due to the simple fact it rhymes with loonie. The coin was introduced in 1996.

Dollar: The dollar is a common currency around the world, including North America, Australia, New Zealand and Singapore. As documented by Oxford Dictionaries, the origin of the dollar comes from a coin called the Joachimsthaler named after the Joachimsthal valley where the silver was mined. This shortened to Thaler (or daler in early Flemish or Low German) which eventually became dollar.

In 1841, the Province of Canada adopted a new system based on the Halifax rating. The Canadian pound was equal to US$ 4.

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, given the increasing trade with the U.S. Over the next decade, different parts of Canada (starting with New Brunswick and Nova Scotia) started adopting the decimal system. The lack of a standard currency contributed to economic inefficiency. It wasn’t until 1871, with the passing of the Uniform Currency Act, that all the different currencies were merged into the Canadian dollar.

Shafak Sajid is a policy analyst