DEFINITION of 'Noon Rate'

A term used by the Bank of Canada to describe the foreign exchange rate between the U.S. dollar and the Canadian dollar. The rate is released by 12:45pm EST by the Bank of Canada on any given day, and is based on the trading that takes place from 11:59am to 12:01pm on that day.

The noon rate is often used by companies as a benchmark for translating financial statements.

BREAKING DOWN 'Noon Rate'

For example, if a Canadian company has operations in the U.S., it can use the noon rate as the benchmark exchange rate for translation purposes.

When accountants consolidate a company's financial statements, they will need to convert the U.S. dollars from U.S. operations into Canadian dollars which, in this particular example, will be done by using the noon rate quoted on the balance sheet date.

Some companies believe that the noon rate is a better measure of currency translation, because all of the trades they make in the FX market take place during the business day, and not at the end of the day.

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