January 7, 2016 / 1:15 PM / 3 years ago

Bank of Canada's Poloz: lower C$ helps adjust to commodity shock

OTTAWA - Weakness in the Canadian dollar is the most important factor in helping Canada adjust to low commodity prices, Bank of Canada Governor Stephen Poloz said in a speech on Thursday, pledging to steer monetary policy independently of the U.S. Federal Reserve.

Bank of Canada Governor Stephen Poloz speaks during an interview with Reuters in Ottawa, Canada December 18, 2015. REUTERS/Chris Wattie

He made his remarks in a speech in which he welcomed last month’s Fed rate hike as a sign of U.S. recovery and said divergence of monetary policy globally should be expected.

The Canadian dollar is trading at 12-year lows, pulled down by a prolonged slump in commodity prices that Poloz said represented a very complex shock for policymakers.

“The most important facilitator of adjustment in these circumstances is a flexible exchange rate ... the depreciation of our currency is a natural part of the process,” he said in the prepared text of a speech.

“It is not a coincidence that the Canadian dollar is about where it was back in 2003 and 2004; oil prices are also about where they were back then.”

Reporting by David Ljunggren and Randall Palmer

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