Bank of Canada chief: Pointless to try to stop C$ moves
By Leah Schnurr and Randall Palmer
OTTAWA (Reuters) - The Canadian dollar and the price of oil move "like a pair of train tracks" and trying to stop exchange rates from shifting could hinder the economy's ability to absorb shocks, Bank of Canada Governor Stephen Poloz said on Friday.
Poloz, speaking to Reuters in a year-end interview, also gave a cautiously optimistic view on the economy for 2016. He said the underlying trend in the economy was likely quieter than the annualized 2.3 percent growth reported for the third quarter.
After a softer fourth quarter, he said, "We should see some more persistent acceleration as we go through next year."
Both Canada's economy and its currency have been hit hard by the crash in the price of oil, as well as low prices for other commodities, with the loonie, as the Canadian dollar CAD= is known, plumbing 11-1/2-year lows. [CAD/]
While some in the market believe Poloz prefers a weaker currency in order to help exports take over from housing and consumption as drivers of growth, he said he always tried to speak neutrally about the currency.
"It is never my intention to influence the currency through what I say," Poloz said, pointing to the strong correlation between the loonie and oil prices.
"The proof is in the chart ... which is the currency with the oil price. I certainly have no ability to move the price of oil, but the exchange rate has followed it like a pair of train tracks."
Flexible exchange rates help an economy digest shocks, and trying to stop a currency from moving means the economy would be slammed by shocks, he said, sitting in a board room at the bank's headquarters, portraits of his eight predecessors hanging from the paneled walls. Continued...