What is the Loonie
The loonie is a colloquial term which refers to the $1 Canadian coin and is also used by foreign exchange (FX) traders to refer to Canadian currency in general. The loonie derives its name from the picture of a solitary loon on the reverse side of the coin. The obverse side of the coin features a portrait of Queen Elizabeth II. The loonie became such a popular nickname for the Canadian dollar that the Royal Canadian Mint trademarked the name in 2006.
BREAKING DOWN Loonie
The loonie, introduced in 1987, was a replacement for the paper version of the Canadian dollar (CAD). This replacement was done both as a cost-saving measure and under pressure from vending machine operators and transit groups. Noted wildlife artist Robert-Ralph Carmichael designed the 11-sided, aureate bronze coin.
The widespread acceptance of the $1 loonie led to the introduction of the $2 coin in September 1995. Although the $2 coin features a picture of a polar bear, by artist Brent Townsend, Canadians quickly began calling the coin the toonie. The public combined the words two and loonie in what is known as a portmanteau. The Royal Canadian Mint also trademarked the term toonie in 2006.
The Royal Canadian Mint located in Winnipeg, in the province of Manitoba mints Canadian dollars. The Bank of Canada, located in Ottawa, Ontario acts as the nation's central bank and manages the currency.
The Loonie in the Global Economy
The Canadian dollar is among the top-10 most widely traded currencies in forex markets. Thanks to Canada's burgeoning exports of energy and commodities, the loonie was among the best-performing currencies against the U.S. dollar (USD) in the first decade of the new millennium.
The loonie fell sharply in value against the dollar in the wake of the 2008 financial crisis, as investors sought the safety of American assets. But it rallied along with the price of oil and other commodities. This increase was mainly due to the strength of the Chinese government's infrastructure-focused stimulus efforts, and thus for Canada's natural resources. Demand from Chinese firms for raw materials and oil, both of which Canada export in abundance, propped up the Canadian economy and the value of the Canadian dollar.
The softening of the international oil markets beginning in 2014 hurt the value of the loonie. From a peak of 1.05 CAD to 1 USD, the loonie fell to a value of fewer than 70 cents per U.S. dollar in early 2016. Since that time, the loonie has recovered somewhat, along with the price of oil and other commodities.