Volatile currency always a concern: Flaherty

Tue Jan 29, 2008 4:28pm EST
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OTTAWA (Reuters) - Finance Minister Jim Flaherty declined to express renewed concern on Tuesday about a Canadian dollar that is worth more than the U.S. dollar, but said exchange-rate volatility does concern the government.

"It's always a concern with respect to any volatility in the dollar, in particular because it makes it difficult for our businesses to do business in terms of exporting," Flaherty told reporters.

The Canadian dollar rose above parity with the U.S. dollar on Tuesday for the first time in three weeks. It first broke past parity last September and continued to appreciate until early November before receding.

On Tuesday afternoon, the currency was at US$1.0009, valuing a U.S. dollar at 99.91 Canadian cents, up from C$1.0044 to the U.S. dollar, or 99.56 U.S. cents, at Monday's close.

Flaherty said he supports a range of 95 to 98 U.S. cents for the Canadian dollar, which he said was the Bank of Canada's target range.

In a January 24 report, the Bank of Canada assumed the currency would average about 98 U.S. cents, or about C$1.02 per U.S. dollar, and said that was consistent with economic performance.

Flaherty also said the country's economic fundamentals were strong and that a U.S.-style economic stimulus package was not needed in Canada. Ottawa was "ahead of the curve" in introducing tax cuts for companies and individuals last October, he said.

"Its quite clear we have a significant slowdown in the United States. As I say, we have strong economic fundamentals but we get affected naturally, particularly in manufacturing and forestry products, when the U.S. economy slows down, as it is," he said.

Given the worsening environment, observers have speculated that Flaherty might present his next budget to Parliament as early as February. But the minister would not be drawn on that subject.   Continued...

<p>Finance Minister Jim Flaherty stands to speak in the House of Commons on Parliament Hill in Ottawa December 12, 2007. REUETRS/Chris Wattie</p>