May 10, 2011 / 11:10 PM / 6 years ago

Strong Canada dollar reflects confidence-Flaherty

* Finance minister doesn't want to see high C$ volatility

* Watching for bubble-type activity in housing

* No plans for new mortgage rules

* Rising rates highlight need for clear fiscal policy

By Claire Sibonney

TORONTO, May 10 (Reuters) - Canada's strong currency reflects confidence in its economy, though sharp moves in its value are not welcome, Finance Minister Jim Flaherty said on Tuesday.

"We want to avoid sudden jerky movements in the Canadian dollar. We saw that a couple of years ago in 2007 and the prime minister and the governor of the Bank of Canada spoke about it at the time, discouraged speculation in the currency and the dollar came down," he said in Toronto.

Flaherty said he didn't want to see further U.S. dollar weakness and thought strong Canadian and U.S. currencies were both positive for the world. But he also noted the government's policy is to let the Canadian dollar's value be set by markets.

"The government is not going to intervene with the Bank of Canada unless we see some extraordinary cause like the events that we saw with respect to the yen in Japan," he said.

The Canadian dollar last month hit its highest level since November 2007, though it pulled back sharply as global commodity prices crashed.

Flaherty, the longest serving finance minister in the Group of Seven wealthy nations, also said he was keeping an eye out for bubble-type activity in the country's housing market. But he said he had no plans to further tighten lending rules.

"I see some softening in the market now and I welcome it," he later told reporters after an appearance at the Bloomberg Canada Economic Summit.

Canada's housing market helped lead the country out of the recent recession as near-zero interest rates spurred a surge in prices and sales activity.

The boom worried the Canadian government enough to impose tighter mortgage rules twice in less than a year. The latest series, aimed at mortgage amortization and refinancing, recently came into effect. [ID:nN17274705] [ID:nN17284967]

Flaherty's appearance came a week after the ruling Conservatives won a crushing victory in the national election, securing a majority that will allow them to govern without support from smaller parties.

The finance minister said the federal budget, which failed to pass in March, would be reintroduced in June with modest changes. He said rising interest rates highlight the need for clear fiscal policy.

The Conservatives pledged during the campaign to eliminate the federal deficit by 2014-15. (Editing by Jeffrey Hodgson)

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