Calculation Methodology for Foreign Exchange Rates Published by the Bank of Canada
As previously announced, the Bank of Canada is changing the way it publishes foreign exchange (FX) rates, effective 1 March 2017. This document describes the selection criteria, calculation methodology and publishing process for the new exchange rates.
New FX rates will be published once a day, by 16:30 Eastern Time (ET), in the form of a single indicative rate per currency pair representing a daily average rate for that currency against the Canadian dollar. The Bank plans to publish the new and existing FX rates concurrently between 1 March and 28 April 2017. This will allow time for users of these rates to make any adjustments that may be required. As of 1 May 2017, the Bank will cease publishing the existing noon and closing exchange rates calculated by the previous methodology, high and low FX rates for a given period, and all forward exchange rates and forward points.
There are many publicly and commercially available alternative sources of exchange rates, including from multiple trading platforms, various internet sources and numerous data vendors. These alternative data sources may provide exchange rates for currencies not published by the Bank of Canada, as well as different calculation methodologies than the one described in this document.
The new Bank of Canada exchange rates are indicative rates only, derived from aggregated price quotes from financial institutions. As such, they do not necessarily reflect the rates at which actual market transactions have been or could be conducted. They may differ from the rates provided by financial institutions and other market sources. Bank of Canada exchange rates are released for statistical, analytical and informational purposes only and are not intended to be used as the benchmark rate for executing foreign exchange trades. The Bank of Canada does not guarantee the accuracy or completeness of these exchange rates.
Exchange rate types
All FX rates will be published as the number of Canadian dollars required to buy one unit of the foreign currency and will be calculated from indicative nominal rates for each foreign currency directly against the Canadian dollar. These indicative rates will be the mid-market quotes supplied by the data vendor used by the Bank (see below).
The Bank will also publish monthly and annual averages of these new FX rates, but will not publish noon and closing rates, high and low FX rates, or forward exchange rates and forward points.
The Bank will continue to publish rates for the Canadian-dollar effective exchange rate index (CERI).1
The list of currencies to be published reflects a combination of those from Canada’s top 20 trading partners, from Statistics Canada’s International Merchandise Trade data and from the top 20 most traded currencies from the Bank for International Settlements’ Triennial Foreign Exchange Turnover Survey. The Bank of Canada will only publish exchange rates for currencies that meet these criteria.
The 26 currencies meeting these criteria, that will be published starting 1 March 2017, are shown in the Appendix. This list will be reviewed every three years and updated based on the latest data to reflect currencies satisfying the criteria above.
If the name of a currency changes, this will be reflected in the labelling of the exchange rate, effective on the date of the name change. If a currency ceases to exist, subsequent entries for the currency will be shown as a blank, effective as of the date the currency ceases to exist. No additional currencies will be added to the Bank’s list of exchange rates to replace the deleted currency until the regularly scheduled triennial review.
The data source for calculating each of these exchange rates will be notional exchange rate quotes for each currency pair (Canadian dollar against the foreign currency) as supplied by Thomson Reuters. Note that these quoted rates are indicative rates and will not necessarily be exchange rates associated with actual currency trades.
Indicative mid-market quotes for each currency pair will be collected every minute between 8:00 and 16:00 ET. Over an eight-hour time span, this will result in a total of 480 observations for each currency.
A truncated mean will then be calculated for each currency pair. These 480 observations will be sorted in ascending order, from lowest to highest exchange rates. The highest 2.5 per cent of these currency rate quotes (12 observations) will be deleted from the sample, as will be the lowest 2.5 per cent. The average exchange rate for each currency pair will be calculated as the simple (i.e., equally weighted) arithmetic average of the remaining currency quotes for that currency pair.
Because indicative, rather than transaction-based, exchange rate quotes are being used to calculate the exchange rates published by the Bank of Canada, there should be data points available for every minute and for each currency in the eight-hour window. However, if there are no quotes supplied for a currency within any one-minute window, the observation for the immediately preceding one-minute window will be carried forward. Furthermore, if there are technical outages at our data source, it is possible that the number of observations used for calculating the truncated mean may vary.
For Christmas Eve and New Year’s Eve (or for the business day immediately before those days, if either of these two days falls on a weekend), the calculation of the daily average exchange rate for each currency pair will be based on mid-market quotes collected between 8:00 and 12:00 ET. The highest and lowest 2.5 per cent of these 240 data points will be deleted from the sample before the average exchange rate is calculated.
Exchange rates will be published each day that the Ottawa Head Office of the Bank of Canada is open for business.2 The exchange rate for each currency pair will be reported on the Bank of Canada’s website by 16:30 ET.
In extraordinary market conditions or in the presence of technical issues, the publication of the Bank of Canada’s exchange rates may be delayed. If, due to these issues, one or more rates cannot be published by 17:00 ET, these missing rates will be shown as a blank for that day. Subject to availability, the missing exchange rates may be released at or before the normal 16:30 publishing time on the next Ottawa business day.
Because of the possibility of late or missing data, users should not depend solely on the Bank of Canada for exchange rates and should have contingency sources of data available.
The precision of each exchange rate quote—the number of digits before and after the decimal point—will vary between currencies. In most cases, the exchange rate will be quoted to four decimal places, but it may be quoted to as many as six decimal places if the scale of the currency pair quote warrants it. Note that this quoting precision is subject to future changes should the level of exchange rates against the Canadian dollar change materially.
Data access and historical data
The Exchange Rate section of the Bank of Canada website will maintain historical data going back 10 years. All rates up to 1 March 2017 will be the old noon and close rates; from 1 March until 28 April, exchange rates calculated by both the previous and the new methodologies will be published; starting on 1 May, only the new daily average rates will be published. Daily rates calculated using the new methodology will not be available for the period between 1 January and 28 February 2017. However, monthly averages for January and February 2017 calculated using the new methodology will be published on 1 March 2017, and the published annual 2017 rate will be based on the new methodology only.
The Bank of Canada may occasionally revise the methodology used to calculate the exchange rates it publishes. Any such revisions will be announced beforehand on the Bank’s website and reflected in this document.
Effective date: 1 March 2017
- Australian dollar
- Brazilian real
- Chinese renminbi
- European euro
- Hong Kong dollar
- Indian rupee
- Indonesian rupiah
- Japanese yen
- Malaysian ringgit
- Mexican peso
- New Zealand dollar
- Norwegian krone
- Peruvian new sol
- Russian ruble
- Saudi riyal
- Singapore dollar
- South African rand
- South Korean won
- Swedish krona
- Swiss franc
- Taiwanese dollar
- Thai baht
- Turkish lira
- UK pound sterling
- US dollar
- Vietnamese dong