Fixing exchange rate to greenback a mistake: BoC

Wed Jan 30, 2008 4:54pm EST
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OTTAWA (Reuters) - It would be a "mistake" for Canada to fix its exchange rate to that of the U.S. dollar since a floating rate acts as a "shock absorber," Bank of Canada Senior Deputy Governor Paul Jenkins said on Wednesday.

"The structures of our two economies are very different," Jenkins said in the prepared text of a speech being given to a House of Commons industry committee.

"This means that each of us often requires different adjustments and different policies in reaction to shocks."

The Canadian dollar fell 4.5 percent versus the greenback in the first three weeks of 2008 but bounced back above parity earlier this week and neared a four-week high of US$1.0131 on Wednesday.

Jenkins also said the Bank of Canada pays close attention to movements in the Canadian dollar but that it does not have a target for the currency,

"Exchange rate movements act as a signal to shift resources into sectors where demand is strongest. Our floating exchange rate helps to facilitate that process," Jenkins said. "That said, we recognize that these types of adjustment can be, and have been, difficult for some sectors and regions of the country.

(Reporting by Frank Pingue; Editing by Peter Galloway)