Strong dollar said to pinch Canada economy

July 11, 2007 at 11:38 PM
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OTTAWA, July 11 (UPI) -- Canada's high-flying dollar will slow the country's economic growth to 2.5 percent from 2.8 percent, the Conference Board of Canada reported Wednesday.

The projected 2007 growth rate brings Canada's economy in alignment with the projected U.S. growth rate.

The value of the Canadian dollar, surging 11 percent against the U.S. dollar recently, exceeded many expectations and added strain to manufacturers and exporters, which are expected to respond by investing heavily in productivity-enhancing machinery, Forecast Director Pedro Antunes said.

A strong currency makes exports less attractive to foreign buyers.

The dollar's rise took place "not because of changes in economic fundamentals, but through changed financial market sentiment toward the Canadian economy," the board said.

Modest U.S. growth also will limit Canada's export growth potential this year, the board said.

The board said it expected Canadian exports will rise by more than 3 percent in 2008 -- and Canada's economy will grow by 3.2 percent -- due to a rebound in U.S. growth and an increasingly stable Canadian dollar.

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