Canada's economy stabilizing, loonie a concern: Flaherty

Fri Jul 24, 2009 6:08pm EDT
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By Ka Yan Ng

TORONTO (Reuters) - Finance Minister Jim Flaherty said on Friday he sees encouraging signs that the domestic economy is stabilizing, but he also voiced concern about the recent appreciation of the Canadian dollar.

"We're conscious of the fact that there has been some recent increase in the value of the dollar. The concern always is volatility and the rapidity of change," Flaherty told reporters.

"Businesses in Canada need time to adjust, especially our exporting businesses with respect with the value of the dollar."

The comments echo remarks made on Friday by Trade Minister Stockwell Day, who said that a rising Canadian dollar was hurting the country's exports, but that the currency has not reached a level to cause serious worries.

The Canadian dollar strengthened to its highest in more than seven weeks against the U.S. currency on Friday, boosted by steadiness in equity and commodity markets and lingering euphoria following the Bank of Canada's mostly rosy economic outlook on Thursday.

At 11:15 a.m. (1515 GMT), the Canadian dollar was at C$1.0820 to the U.S. dollar, or 92.42 U.S. cents, up from C$1.0865 to the U.S. dollar, or 92.04 U.S. cents, at Thursday's close. It has risen about 8 percent from this month's lowest point, after a 6 percent slump in June.

The currency gained nearly 20 percent in the span of two months earlier this year before the Bank of Canada warned markets about the economic threat posed by the Canadian dollar's sharp rise.

"There is some upward pressure on the dollar, which we're seeing in markets recently and the (Bank of Canada) governor yesterday expressed some concern about that and I agree with the governor," Flaherty said.   Continued...

<p>Finance Minister Jim Flaherty waits to testify before the Commons finance committee on Parliament Hill in Ottawa June 16, 2009. REUTERS/Chris Wattie</p>