Bank of Canada unlikely to take aim at rising currency

While the Bank of Canada's hopes for an export revival could be thwarted by the recent resurgence in the Canadian dollar, it has few options other than cutting interest rates to try and turn things around. Governor Stephen Poloz could try talking the dollar down, but that is unlikely to work for very long unless he is prepared to back up his words with action. Given the recent increase in core inflation, however, we doubt that the Bank would be willing to go as far as cutting interest rates just to bring the Canadian dollar down. If Poloz is lucky, the US Fed might even do his work for him if it starts to signal more firmly that US rates will begin to rise next year.