So far so good for Bank of Canada's war against loonie, but is war necessary? - Metro US

So far so good for Bank of Canada’s war against loonie, but is war necessary?

OTTAWA – Bank of Canada governor Mark Carney has reason to cheer and also to give himself a pat in the back.

With a few well-chosen words and the odd veiled threat of intervention, the central bank chief has helped to take about four cents off the value of the loonie in about a week.

The loonie had been flying high, reaching above 98 cents US last Monday, when the governor alerted markets he has little intention of moving quickly on interest rates, following that up with a warning that he has not ruled out currency intervention.

It’s been mostly downhill since for the loonie, falling more than a cent on Monday to dip below 94 cents US in mid-afternoon trading.

Analysts say there are a number of reasons the dollar has gone from hot to cold, but it is clear that Carney’s words were influential.

But while Carney sees the loonie as a menace, not all economists agree. Some say there are almost as many benefits to a strong loonie as negative impacts.

Scotiabank economist Derek Holt says the bad outweighs the good only in the margins and that the impact on growth has been over-estimated.

More from our Sister Sites