The Canadian Dollar and the Bank of Canada
Today’s Daily Angle comes from Wikinvest Wire member Kathy Lien of KathyLien.com. You can read the full article on her blog.
Flash Player 9 or higher is required to view the chart Click here to download Flash Player nowThe Bank of Canada 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 in September, 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.
Last 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.
