Flaherty says loonie seen as safe bet

Tue Jul 26, 2011 4:41pm EDT
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By Trish Nixon

BURLINGTON, Ontario (Reuters) - The Canadian dollar, which shot up to a 3-1/2 year high on Tuesday, is attracting safe-haven investors and reflects the country's fiscal and economic health, Finance Minister Jim Flaherty said.

"Canada is a fiscally responsible country. Our currency value to some extent represents the stability of our country," Flaherty said in Burlington, Ontario, where he hosted a meeting of small-business people on Tuesday. "There are investors, obviously, around the world ... looking for safe havens and the Canadian dollar offers some attraction."

Flaherty also said he was "relatively confident" the United States would reach a debt ceiling agreement within the next few days.

He said the appreciation of the currency reflects Canada's fiscal prudence and strong prices for the commodities it exports.

The Canadian dollar climbed as high as C$0.9407 to the U.S. dollar, or $1.0630, on Tuesday before Flaherty spoke, its highest level since November 2007, when it hit a modern-day high.

There has been a huge influx of foreign cash into Canada's debt market recently as crises in Europe and United States have sent investors looking for safety, and that has helped drive up the currency.

Ottawa is always concerned about any rapid fluctuation in the value of the Canadian dollar, Flaherty said, but gave no hint that the Bank of Canada was concerned enough to intervene.

The Canadian dollar's recent rise has been more gradual than its rally immediately following the global financial crisis. In past episodes of abrupt appreciation, Flaherty mused openly about possible steps to slow the rise but he now appears more sanguine. In January, he said the strong Canadian dollar was here to stay and part of "a new world".   Continued...