Harper says Bank of Canada can act on FX: report

Wed Sep 21, 2011 5:43pm EDT
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(Reuters) - The Bank of Canada could intervene to prevent a speculative appreciation of the Canadian dollar, Prime Minister Stephen Harper said in an interview published on Wednesday.

Bloomberg News quoted Harper as saying that the Bank of Canada would not tolerate an appreciation in the Canadian dollar if it undermined the Canadian economy.

Monetary authorities "would be prepared to intervene if they thought there were movements in the currency that were contrary to the country's interests and not being driven by actual underlying fundamentals," Bloomberg quoted Harper as saying.

The Bank of Canada's web site outlines strict guidelines on when the central bank may intervene in foreign exchange markets, and says the bank does not target a specific level for the Canadian dollar.

The central bank has not intervened in foreign exchange markets to affect the Canadian dollar since September, 1998.

"Canada's current policy is to intervene in foreign exchange markets on a discretionary, rather than a systematic, basis and only in exceptional circumstances," the bank says, citing market breakdown, extreme price volatility, liquidity crunches or extreme currency movements as possible reasons.

The Bank of Canada is fiercely independent and it is rare for politicians to comment on monetary policy.

Even as Harper spoke, the Canadian dollar was weakening not strengthening, sinking to its weakest level since December on concerns about the outlook for the U.S. economy.

The full policy is available here: here

(Reporting by Janet Guttsman; Editing by Jeffrey Hodgson)

<p>Prime Minister Stephen Harper talks to the media at U.N. headquarters in New York September 20, 2011. REUTERS/Jessica Rinaldi</p>