Canada Is Breaking Free

"We had thought that if the U.S. economy slowed down, the global economy would probably slow down, and that doesn't seem to be panning out as much as people thought," said David Watt, senior currency strategist at RBC Capital Markets. "If the currency is, to an extent, decoupling from the U.S., then it makes sense to come out with a Canadian dollar forecast which pays less relevance to the U.S. economy." Mr. Flaherty said that decoupling is a strong word, but there has been an increase in the differences between the Canadian and U.S. economies. ... Mr. Flaherty, who has been calling on retailers to lower their prices, said those that he's met with "almost uniformly have recognized that it's in their own interest to reduce prices…" But the Finance Minister also pointed out that the strong dollar makes imported machinery and equipment cheaper for Canadian manufacturers. He said the manufacturing sector, which has long been adjusting to the rising loonie, has been largely resilient, although auto and forest firms are struggling, largely because of weakness in the U.S. economy. Mr. Flaherty's mini-budget this week said "the appreciation of the Canadian dollar has helped to boost the volume of [machinery and equipment] investment, which has increased 48 per cent since early 2002, mirroring the increase during the high-tech investment boom." "The second benefit of the higher dollar is to reduce the price of imported consumer goods," the mini-budget added. http://www.reportonbusiness.com/servlet/story/RTGAM.20071103.wdollar03/BNStory/robNews/

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