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

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

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

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.

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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