Why is the Canadian dollar called loonie?

Currencies across the world are influenced by the respective countries' cultural backgrounds. Influences from across social, economic, linguistic, or even biological roots find their way into making a country's currency unique and closer to home.

For instance, the Indian Rupee's (INR) nomenclature goes back to the 16th century when an emperor picked the "rupaya" as the official currency, which in turn, goes back to the word's roots in Sanskrit, one of the earliest ancient documented languages of the world.

The Canadian dollar, popularly known as the loonie, too, has a similar history.

Let's dig deeper into this reserve currency and find out. But before that, let's dive into some background into the country's currency system.

Canadian currency system 

The issuance of Canadian reserve currency goes back to 1858, when the Canadian dollar replaced other currencies, including the British Pound or the American dollar, as the country's legal tender. This act was formalised by the Uniform Currency Act of 1871.

The Canadian dollar would switch between being pegged against the US dollar or being a free float currency until 1970. Since then, it has been a free float currency.

A Canadian dollar is made up of 100 Canadian cents and is issued by the country's central bank, the Bank of Canada. Let's now look at loonie and its reference as the popular name of Canada's national currency.

Representative Image (Source: Pixabay)

How did the loonie make it to Canada's coinage system?

The currency's nickname is rooted in the word "loon", an aquatic bird native to Canada, inscribed on the backside of the one-dollar coin. How the provincial aquatic bird of Ontario found a place on the coin is an interesting tale.

The Canadian dollar coin was brought into circulation in 1987 as a cost-saving measure to replace the one-dollar bills, which were discontinued a couple of years after the coin's introduction.

Wildlife artist Robert-Ralph Carmichael submitted the design for the 91.5 per cent nickel-based coin. The initial design was supposed to be that of the voyageur, earlier found on all Canadian coins before loonie's introduction.

According to reports, Carmichael's design was accepted after the materials needed for the initially approved design were lost in transit in November 1986.

While several other designs were periodically inscribed on the silver coins circulating in Canada before 1987, the voyageur's run continued for the longest period. Other designs such as The Royal Visit, the centennial dollar, Prince Edward Island's centennial dollar, or the Manitoba centennial dollar made their way to the country's coinage system before the loonie.

According to some archives, the 11-sided Canadian dollar coin was nicknamed "Loonie" soon after its introduction in 1987.

Several other designs were also introduced after the introduction of the C$1-coin. These included commemorating the 125th anniversary of (Canadian) Confederation, the National War Memorial coin, several versions of the "Lucky Loonie", among others.

Let's now look at how the loonie currently fares among other international currencies:

How does the Loonie fare among international currencies?

The loonie has been a free float currency since the 1970s. It is believed to be primarily influenced by commodity prices across the world.

The currency, issued by the Canadian central bank, is among the most stable and reliable currencies globally, as per the International Monetary Fund.

The currency is measured against the US dollar. According to the current foreign exchange rate, one Canadian dollar is equivalent to 0.82 US Dollar.

Currently, the Canadian central bank issues one- and two-dollar coins, called the Loonie and Toonie, respectively. One cent, five cents, 10 cents and 25 cents coins called the penny, nickel, dime and quarter, respectively.

While the penny's production was discontinued in 2012, it is still considered legal tender in Canada.

The Bank of Canada also issues five-dollar, 10-dollar, 20-dollar, 50 dollar and 100-dollar paper notes or bills.