A key reason Canada’s international reserves are nonetheless adequate is our freely floating exchange rate. Canada adopted a flexible exchange rate in 1950 and, except for an eight-year stretch in the 1960s, our dollar has floated ever since. We have not intervened to stabilize the Canadian dollar for over two decades now. This is a period that encompassed major changes in our exchange rate.
During the commodities supercycle, the Canadian dollar rose from 62 cents US in 2002 to $ in 2007. During the global financial crisis, it dropped sharply to as low as 76 cents US before settling above parity for almost five years.