Bank of Canada Governor Stephen Poloz said on Tuesday that he hasn't been talking down the Canadian dollar to boost exports.
Speaking in a interview at the G20 meeting in Istanbul, Poloz said the loonie is a casualty of the falling price of oil, the same issue that has dominated the gathering of finance ministers and central bankers.
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His statement came after U.S. representatives at the G20 warned of the risks of countries manipulating their currencies to gain a trade advantage.
"The Americans very precisely warned everybody that this is a risk … that there are signs that there is currency manipulation going on," a non-U.S. official told reporters.
U.S. may target currency manipulation
A bipartisan group of U.S. lawmakers is expected to unveil legislation soon aimed at stopping trading partners from manipulating their exchange rates to gain a competitive edge.
The U.S. did not name the countries it believes are manipulating currency, but China, with which it has a very large trade deficit, might be high on its list.
A senior U.S. Treasury official specifically exonerated Japan, which is using aggressive monetary stimulus to kickstart its economy but is still seeing a falling yen.
The Canadian dollar has fallen 15 per cent against the U.S. dollar since last July and the Bank of Canada’s decision last month to cut a benchmark interest rate sent it plunging.
"I honestly reject the notion that I'm talking down the dollar," Poloz told reporters.
He said the rate cut was not an attempt to drive the dollar down, but a response to an economy that has been hard hit by lower oil prices.
Oil prices a big unknown
"If over the last 18 months the economy has underperformed the expectations …, it's only by being open about that and people seeing it happening, and oil prices declining on top of that, that the dollar has moved," he added. "It's not about what we did. It's about how the economy has behaved."
The finance ministers and central bankers in Istanbul were unwilling to estimated how big the oil shock was and how long prices would stay where they are, Poloz said.
Canada has already experienced a slowdown in growth because of low crude prices.
The G20’s final communiqué noted the uncertainty over the direction of oil prices, saying it was a key factor to monitor in the coming year.
"We note that the sharp decline in oil prices, reflecting both supply and demand factors, will provide some boost to global growth, but with varying implications across economies," it said.
Stalled global growth was a key concern among G20 members at the meeting, but the final statement contained no agreement on how to boost GDP, agreeing only to "further review."
The G20 called for "a set of policy measures that further improves the business environment and facilitates financial intermediation," without setting out how that might be done.