Changes to Published Bank of Canada Foreign Exchange Rates
Background information about changes to the publication of exchange rates taking place between 1 March and 1 May 2017.
What is changing and when
- As of 1 March 2017, the Bank of Canada is publishing new data on the foreign exchange (FX) rate for 26 currencies. A single rate reflecting the daily average exchange rate per currency pair is now published for these currencies each day by 16:30 ET. These 26 currencies reflect the vast majority of FX transactions conducted against the Canadian dollar. Their selection reflects the combination of the top 20 currencies by trading volume (based on the Bank for International Settlements Triennial FX Turnover Survey) and those of Canada’s top 20 trading partners (based on Statistics Canada’s International Merchandise Trade Database). The currencies will be reviewed and adjusted, if required, every three years.
- From 1 March to 28 April 2017, these new rates will be published alongside all existing FX rate data to allow users time to adjust. During these two months, the URLs of the existing FX tools will remain the same. However, the Exchange Rate section of the Bank’s website will be reformatted and some data will therefore be relocated.
- As of 1 May 2017, the Bank will publish exchange rate data for 26 currencies only. When the Bank ceases publication of new data for all exchange rates published under the old methodology, including daily noon and closing rates as well as high and low FX rates, past data will remain archived on the Bank’s website.
- For more information, see the associated press release or the calculation methodology document.
Why the Bank is making these changes to the exchange rates
- reinforce that Bank of Canada exchange rates are provided as a public good—for statistical, analytical and informational purposes only—and not as benchmarks for transactional purposes;
- reflect the fact that exchange rates are now readily available from numerous alternative sources;
- are being implemented after wide public consultation and take into account broader international work on the appropriate design of FX reference rates; and
- are consistent with similar changes undertaken by other central banks.
Why the Bank announced the changes more than one year in advance
- The Bank has given the public more than one year’s notice to allow ample time for users of these rates to make any adjustments that may be required.
- The Bank is acutely aware that these changes may necessitate adjustments in business processes, IT systems, legal contracts and, in some cases, federal and provincial legislation.
- The Bank conducted a public survey of the use of its reference rates in 2014. Respondents made it clear that a reasonable amount of lead time would be required to prepare for the changes.
- In particular, more than 80 per cent of respondents indicated that a lead time of three months or less would be acceptable. By delaying implementation of these changes for one year, and by publishing the new rates alongside existing rates for a period of two months, the Bank is providing considerably more lead time to enable the smooth implementation of any adjustments that may be required.
Who will be affected by these changes?
- Based on a 2014 survey, a broad range of stakeholders currently use these rates, including
- entities that use the rates for general business purposes;
- entities that use the rates for commercial contracts or as a benchmark for transactions;
- corporations that use the rates for accounting purposes; and
- individuals and entities subject to legal requirements to use these rates, e.g., the Income Tax Act.
- The Bank will therefore continue to publish exchange rates but has reduced the number published as well as their frequency and modified the calculation methodology. The Bank is aware that reducing the number of rates it publishes could require changes in business processes, IT systems, legal contracts and federal and provincial legislation. In some cases, it could also require seeking alternative sources of exchange rate data that are more appropriate for specific business purposes, including as benchmarks for transactions.
- By giving ample advance notice, delaying implementation of these changes for one year and publishing the new rates alongside existing rates for two months, the Bank has provided considerable lead time to enable the smooth implementation of any adjustments that may be required.
What the Bank is doing to prepare users for these changes
- In 2014, the Bank conducted a broad public survey to gain a fuller understanding of the impact of these changes.
- The Bank delayed implementation of the changes for one year and communicated the changes well in advance to give users ample time to adjust, including seeking out alternative sources for rates.
- The Bank has consulted with several federal government organizations on the changes and has notified the relevant provincial authorities and industry association groups.
- The Bank is providing a two-month window, from 1 March to 28 April 2017, during which both new and existing FX rate data will be published concurrently.
- As of 1 May 2017, the Bank will continue to publish exchange rates for 26 currencies, as a public good, for statistical, analytical and informational purposes.
Why is the Bank reducing the number of currencies for which it provides exchange rates?
- Findings from the Bank’s 2014 survey, together with its own data, suggest that many currencies are infrequently accessed.
- The Bank has decided to limit its published rates to those that represent the majority of FX activity against the Canadian dollar and are readily tradable.
- This is consistent with practices at other major central banks.
Why the Bank is going to publish only one rate per day, and why the Bank is changing its calculation methodology
- The Bank is changing its calculation methodology to reflect the average observable rate throughout the Canadian business day, rather than at a single point in time.
- This reinforces the distinction between exchange rate fixings used as benchmarks for transactional purposes and Bank of Canada exchange rates that are provided as a public good, for statistical, analytical and informational purposes only.
- The changes have been undertaken in the context of broader international official sector work on the design of FX reference rates, including recommendations from the Financial Stability Board on FX benchmarks and the Principles for Financial Benchmarks published by the International Organization of Securities Commissions.
Where else to get exchange rates
- Unlike when the Bank began publishing its exchange rates many decades ago, rates are now readily available from numerous alternative sources (multiple trading platforms, Internet sources and other data vendors).
The Bank will discontinue publishing noon and closing rates as well as high and low FX rates
- While the Bank will continue publishing monthly and annual averages, it will discontinue publishing noon and closing as well as high and low exchange rates.
The Bank will keep all past data
- The Bank will maintain all past exchange rate data exactly as they are and will not restate or recalculate historical rate data. Data calculated under the old methodology will be archived on the Bank’s website.
The Bank will adjust its exchange rate lookup tools
- The Bank will maintain its various exchange rate lookup tools but will make necessary adjustments to reflect these changes while ensuring the integrity of all historical data. For more information, refer to the calculation methodology.
Some facts on the number of people who access the Bank’s exchange rate data
- The Bank’s exchange rate pages receive more than one million unique visitors a month, representing 80 per cent of all www.bankofcanada.ca page views.