Former BoC Governor Dodge sees rise in C$1

Wed Dec 16, 2009 3:49pm EST
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OTTAWA (Reuters) - The Canadian dollar should rise further next year on the back of commodity firmness and a soft U.S. dollar, former Bank of Canada Governor David Dodge predicted this week.

In a forecast for the law firm Bennett Jones LLP, where he is a senior adviser, Dodge wrote that the Canadian economy should grow at an annualized 3-1/2 percent in the first half of 2010.

In the second half, the central bank's target interest rate will begin to rise, and commodity prices, except natural gas, should continue to firm in the face of strong Asian demand. The central bank has conditionally promised to keep rates on hold through the first half of the year.

"Commodity strength and continuing U.S. dollar weakness should contribute to modest appreciation of the Canadian dollar," Dodge said in the report, dated December 15.

"Credit spreads should be stable but mid- and longer-term rates should rise as a consequence of increased rates on government bonds."

Dodge was central bank governor until January 2008.

(Reporting by Randall Palmer; editing by Rob Wilson)