OTTAWA (Reuters) - The high Canadian dollar and the speed with which it is fluctuating are putting pressure on the manufacturing sector, Finance Minister Jim Flaherty said on Monday.
The Canadian dollar -- helped in part by weakness in the U.S. dollar -- has climbed steadily for much of the past few months and at one point was up 17.5 percent this year.
“There’s no question that the higher dollar puts some pressure on the manufacturers in particular. There’s also no question that there is continuing downward pressure on the U.S. dollar,” Flaherty told the Canadian Broadcasting Corp.
“Especially when we see that volatility in the dollar, that is very difficult for manufacturers to handle.”
The Bank of Canada said last week that it expected the strength in the Canadian dollar to more than fully offset other favorable developments in the economy since July.
Flaherty said one way to cut the value of the currency was for the central bank to engage in quantitative easing -- effectively printing more money to buy debt.
“That would have limited effect. It’s not a remedy that is a magic remedy that would have long term effects,” he said.
Flaherty also said Ottawa would continue with a two-year C$46.5 billion ($43.5 billion) stimulus program it unveiled in January.
“This has to continue until we see a retrenched recovery. It is dangerous ... for anyone to start doing exit strategies now because we are not out of the woods yet,” he said.
The Canadian dollar -- which had already retreated on the Bank of Canada’s warnings -- dropped to its lowest level in almost three weeks on Monday as commodity prices fell and risk-averse investors moved back into the perceived safety of the U.S. dollar.
The currency ended at C$1.0670 to the U.S. dollar, or 93.72 U.S. cents, its lowest level since October 6.
Reporting by David Ljunggren; editing by Rob Wilson