Bank Of Canada: Rising C$ Could Hit Export Outlook, Affect Monetary Policy

• If the buoyant Canadian dollar continues to rise it could create headwinds for exports and business investment as well as affecting monetary policy, Bank of Canada Governor Tiff Macklem said on Thursday.
• The currency has jumped about 4% since the central bank updated its projections in April, driven by surging commodity prices. Canada is a major exporter of energy, lumber, minerals, and agricultural products. The C$ hit a six-year high on Wednesday.
• "We've highlighted that a stronger dollar does create some risk," Macklem told reporters after a speech to university students in his most detailed comments yet about the potential drawbacks of a more muscular currency. "If it moves a lot further, that could have a material impact on our outlook and it is something we have to take into account in our setting of monetary policy."
• Further gains could drag down export projections. "If we're less competitive, our export profile is weaker, that also probably means that our investment profile will be weaker," he said. The Canadian dollar was trading 0.4% lower at 1.2180 to the greenback, or 82.10 U.S. cents, pressured by a sharp decline in oil prices.

(Source: Reuters)