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UPDATE 1-Bank of Canada says strong C$ a drag on economy

by on September 25, 2012 8:57 pm BST
 

Tue Sep 25, 2012 4:57pm EDT

* Deputy Governor Lane says central bank has no target for
currency

* Says bank’s focus is on inflation targets

By Scott Haggett

CALGARY, Sept 25 (Reuters) – The strong Canadian dollar has
been a drag on the Canadian economy for the last few years, but
the Bank of Canada has no target for the currency’s level and
focuses instead on inflation targets, central bank Deputy
Governor Timothy Lane said on Tuesday.

“The Canadian dollar is a factor that we look at very
closely in relation to the economic outlook for Canada and for
the last few years has been at a level that represents a drag on
the Canadian economy, particularly with regards to our export
performance,” Lane told a business audience after a speech in
Calgary.

“But when we look at the exchange rate in relation to making
monetary policy, we view that through the prism of our inflation
target … we don’t have a target for the level of the exchange
rate, but rather we factor it in.”

Canada’s currency soared to a 13-month high this month on
hopes that new stimulus measures by U.S. and European central
banks will revive global growth.

The Bank of Canada has said repeatedly the currency’s
strength has dampened economic growth by making it tougher for
exporters to stay competitive.

In its most recent policy decision on Sept. 5, the central
forecast Canadian exports will remain below their pre-recession
peak until the beginning of 2014, partly because of “the
persistent strength of the Canadian dollar”.

Lane also noted that when the central bank makes monetary
policy, it does so for the broader economy and not any specific
sector or region.