High dollar not justified: Dodge

[CHIMO]

Bank of Canada Governor David Dodge is suggesting that the recent moves in the currency are not justified by market forces.

In an appearance before the Senate Wednesday afternoon, he said appreciation of the Canadian dollar until early this year was justified by market forces. But he carefully avoided comment on the recent surge.

"Certainly up until early this year, by and large, much of the adjustment of the Canadian dollar ... was the result of these market forces," he told the Senate.

The central bank has said it sees no need to react with interest-rate adjustments if the Canadian dollar is merely responding to market forces. But if the moves in the loonie are not related to economic fundamentals, the bank would be inclined to do something about it.

http://www.theglobeandmail.com/servlet/story/RTGAM.20060503.wdodge0503a/BNStory/Business/home

God has spoken. The rules have changed. We just need to know the rules.

[daleo]

1. I guess this hints at lower interest rates

That's usually the remedy for a too-high currency (assuming he is correct).

[hopeisaplace]

2. that's right, that usually is the remedy

My "gut" feeling is that if they continue to let rates rise,
it WILL negatively affect spending/the economy...in a bigger way
than what they are thinking.

Why I feel this is the convergence of multiple negatives.
Higher gas prices at the same time as higher rates...Most people
have lines of credit, and higher rates will cause people to think
twice about spending on "peripheral" items if this convergence of
"negatives" continues. Personally our household is already making
adjustments for these rising costs by spending less, and we will continue
to spend less if the "negatives" keep coming. But having said that,
even if gas comes down "a little" and rates don't go "up as much", we
will still cutback. I don't have a positive feeling about the direction
of our country right now. For me, I am of the firm belief that conservative
governments do not know how to handle money. Funny though, most people feel
the opposite is true due to the standard cliche of "tax and spend liberals".


Anyway, that's my opinion on it.