Canada PM concerned by C$

Tue Oct 13, 2009 6:25pm EDT
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By Allan Dowd

VANCOUVER (Reuters) - Some of the Canadian dollar's sharp climb is justified by fundamentals, but too rapid a rise could damage the country's economic recovery, Prime Minister Stephen Harper said on Tuesday.

Canada's dollar hit a 14-month high, putting it within striking distance of parity with a weakening U.S. dollar on Tuesday, but later relinquished some of the gains as the market's appetite for risk waned.

The currency closed the session at C$1.0365 to the U.S. dollar, or 96.48 U.S. cents, up from C$1.0444 to the U.S. dollar, or 95.75 U.S. cents, at Friday's close.

"Obviously, it is a concern," Harper told reporters in Vancouver, noting in both English and French that Bank of Canada Governor Mark Carney had also worried about volatility in the currency.

The central bank has said it would not have to counteract rises in the Canadian dollar that are due to fundamental factors, and Harper said at least some of the increase was because of such economic strength.

"We know that Canada's economy is relatively stronger than certainly virtually any other developed country, industrialized economy -- certainly stronger than all of the G7 economies and stronger than most in the developed world," he said.

"And obviously some of these factors will have something to do with the rise of the (Canadian) dollar. That said, the governor of the Bank of Canada has been clear that too rapid a rise in the dollar is a risk to our recovery," he added.

"As we said before, we're not out of the woods. There are many risks, some of them within our control, some of them beyond our control, and obviously the value of the Canadian dollar is a risk to recovery. I don't think it's a risk to choking off the recovery but if it goes up too rapidly it does have difficult effects on our economy. So that's why the governor has expressed those concerns."   Continued...