Finance Minister Bill Morneau told Reuters reporters on Tuesday that he “could live” with a more robust Canadian dollar, noting that the recent rise of the currency reflected the country’s economic resilience.
The Canadian dollar has rallied more than 13% against the US greenback since early May, and touched its strongest point in more than two years last Friday.
“I see the positive trajectory of the Canadian dollar as a clear reflection of our economic strengths,” Morneau said.
In the second quarter, Canada’s economy grew at its best pace since late 2001, reflecting an improving outlook that prompted the Bank of Canada (BoC) to raise interest rates in July and October after leaving the benchmark rate untouched for nearly seven years.
“Interest rate changes are something that comes along with a positive economic situation, so all of this is to be expected and something for us to watch. My view is that the economy is showing continued strength even at our current dollar valuation,” Morneau said.
He added that he was carefully monitoring the market for any stresses that higher rates may place on indebted households.
The rate hikes have prompted fears that some Canadians could soon find themselves over their heads amid hot housing markets in many major cities. The debt of Canadians compared with household income is near a record high.
“As interest rates change, we are carefully watching the stress [this] might place on Canadians,” Morneau told reporters, noting that the “overwhelming majority” of Canadians are on fixed-rate mortgages.