UPDATE 2-Canada's Morneau says economy will benefit from weak C$ over time

Wed Mar 30, 2016 4:26pm EDT
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(Adds interview with Morneau, background)

By Richard Leong and David Ljunggren

NEW YORK/OTTAWA, March 30 (Reuters) - Canadian Finance Minister Bill Morneau on Wednesday said it may take more time for the country's economy to reap the benefits of a weaker Canadian dollar as domestic manufacturers adjust to its impact.

The dollar hit its weakest level in more than a decade in January, dragged down by the steep drop in oil, a major Canadian export. It has since recovered slightly as energy prices stabilized.

"Positive effects of the lower dollar may take longer to materialize, especially as our manufacturing sector adjusts after a longer period where the dollar was strong," Morneau said in a speech to an event sponsored by the Canadian Association of New York.

Morneau later said that while a lower Canadian dollar should boost exports, firms would first have to invest in plants and equipment to boost capacity and thereby take advantage of increased foreign demand.

"We believe we're starting to see the green shoots from that activity with some positive indicators," he said in a phone interview.

"We think that will continue to be the course over the next four to six quarters ... from Canadians making investments to enhance our ability to export."

Separately, Bank of Canada Deputy Governor Lynn Patterson said on Wednesday that it takes up to two years for the full effect of exchange rate movements to be felt in the economy.   Continued...