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Bank of Canada and Outlook for Canadian Dollar
I was on the Business News Network today talking about my outlook for the Canadian dollar and how I think it could be headed to 1.10. Here are some of my recent CAD comments about whether the BoC is worried. Click on the image to access the video:
The Bank of Canada on the other hand is growing increasingly uncomfortable with the strength of their currency. In July, the Canadian dollar skyrocketed because of the central bank’s unusual optimism, but earlier this month, the BoC toned things down significantly. At the time, they said as long as inflation does not skyrocket, interest rates will remain unchanged until the second quarter of 2010. However last week, the BoC took things one step further. Canadian Finance Minister Jim Flaherty proposed an expansion of mortgage buy-backs to C$125 Billion or $116.4 Billion, which represents a return to easier monetary policy. The proposal comes on the midst of comment by Governor Mark Carney who claims the recovery is not “self-sustainable” and is a mere consequence of unconventional measures. On Friday,
Carney also said he would provide more stimulus if needed while Deputy Governor Longworth said the currency Is a risk to economic recovery. Although we do not expect intervention from the Bank of Canada, if the Canadian dollar continues to rise, the BoC could grow more dovish.