OTTAWA, April 30 Commodity prices will largely
set the level of the Canadian dollar in a link that is almost
mathematical, Bank of Canada Governor Stephen Poloz said on
Wednesday, adding that policymakers in the oil-producing country
have little say in the matter.
Speaking to a Senate banking committee, Poloz said the
currency has proven historically to be influenced mostly by the
terms of trade, largely determined by the price the country
fetches on world markets for its oil, metals and other natural
"Over the sweep of say 30 years it's a very good
approximation," he said.
"So when the terms of trade were very weak the dollar was in
the 60s (60 U.S. cents per Canadian dollar), the terms of trade
are far higher now than it was and so the dollar's higher.
There's no choice with this, this is almost arithmetical, the
relationship," he said.
Poloz, seen by some market players as talking down the
dollar to help exporters, acknowledged that the currency has
lost ground against the U.S. dollar since he adopted a more
downbeat outlook last October. But he insisted he is "not a fan"
of any particular value.
"And as a consequence markets have decided that the Canadian
dollar should be lower and that is what has happened. But we
have no idea how far it will go or what it should be."
Poloz also said Canada's economy would benefit from building
more oil pipelines to transport Alberta crude to markets.
"If we have more capacity and there is more demand, having
the ability to deliver will of course add directly to GDP (gross
domestic product), and the investment related to it will of
course add to GDP," he said.
"We're operating in a constrained fashion and so the economy
is finding ways to adapt to that. It would be obviously better
if there were no such constraints."
Poloz was responding to a question by a Liberal senator
about the impact of Canada's "difficulties" in completing
various pipeline projects.
The senator didn't name specific pipelines but was likely
referring to TransCanada's delayed Keystone XL pipeline
project to the U.S. Gulf Coast as well as others from Alberta to
the Canadian West and East coasts.
(With additional reporting by David Ljunggren in Ottawa and
Alastair Sharp, Leah Schnurr, Cameron French and Solarina Ho in
Toronto; Editing by Jeffrey Hodgson and Cynthia Osterman)