Flaherty signals less concern on strong dollar

Tue Mar 16, 2010 3:29pm EDT
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By David Milliken and Axel Threlfall

LONDON (Reuters) - The Canadian dollar's recent rally in part reflects the country's healthy fiscal position, and does not suggest extraordinary volatility, finance minister Jim Flaherty said on Tuesday, appearing more relaxed with the currency's sharp appreciation.

The Canadian dollar rallied to a 2010 high on Tuesday at C$1.0137 per U.S. dollar, its highest level since July 2008, as it edged closer to parity with the greenback.

But unlike last August when Flaherty suggested policymakers could take steps to halt the currency's rise, he seemed unperturbed by the trend this time.

"If we see too much volatility, that's difficult for businesses that export to deal with. So far we haven't seen extraordinary volatility," Flaherty told Reuters in an interview following a speech in London.

He earlier said that the currency's rise was not just due to rising prices for Canada's commodity exports or U.S. dollar weakness.

"There's some upward pressure on the (Canadian) dollar, but it's a market currency and we be believe in markets and when you believe in markets you have to let your currency float," he told the UK-Canada Chamber of Commerce.

"To some extent Canada's relatively strong fiscal position is assisting the rise in the Canadian dollar," he added at a later press briefing following his speech.

The currency had been hovering near 20-month highs, but resumed its march higher on Tuesday amid firmer oil and equity prices as well as stronger-than-expected Canadian factory sales data.   Continued...