Canada ready to buy $US on weakness

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While he’s a bit shaky on his understanding of monetary operation his intentions are clear enough:

Bank of Canada talks tough on rising dollar

By Kevin Carmichael

Oct. 3 (The Globe and Mail ) — Bank of Canada Governor Mark Carney is done with nuance. His new message for those who doubt he’s prepared to weaken the dollar if Canada’s recovery veers too far off track: Just watch me.

Despite stronger than expected growth in the second half, the central bank has actually reduced its outlook for the next two years, saying that’s when the current appreciation of the currency will show up in growth figures.

Given that backdrop, Mr. Carney said he would have no choice but to act if international investors continue to push the dollar higher – something they’ve been quite willing to do, in part because most analysts and investors are skeptical a central bank that hasn’t intervened in currency markets since 1998 is willing to back up its talk with action.

But if the currency continues to surge, Mr. Carney stressed that he retains “considerable flexibility” to stoke the demand required to get inflation back to the 2-per-cent target. His options would include creating money to buy U.S.-dollar denominated assets or direct intervention in foreign exchange markets.