a type two force, this time in the opposite direction for the canadian dollar, is the adjustment of the u. s. dollar against most major currencies, reflecting concerns about the u. s. current account deficit. i'd like to elaborate on this as i discuss the recent appreciation of the canadian dollar. the recent appreciation of the canadian dollar since the beginning of 2003, the canadian dollar has appreciated by about 40 per cent relative to the u. s. dollar, and by a lesser amount against a trade - weighted basket of the currencies of our major trading partners. this sharp appreciation appears to be largely the result of two factors : strong foreign demand for canadian products, especially commodities, and broad - based weakness in the u. s. dollar. that is to say, both type one and type two forces have been at play. global economic growth has been strong over this period. sustained strength in the u. s. economy, combined with tremendous growth in china and other parts of asia, has led to a surge in world demand and prices for oil and gas, metals, and other commodities that canada exports. in many respects, what we have been seeing since 2003 is the reverse of what happened as a result of the fallout of the asian crisis in the second half of the 1990s, when world growth weakened, commodity prices plunged, and the canadian dollar dropped to a low of about 64 cents u. s. indeed, our own research has long found a relationship, in the same direction, between non - energy commodity prices and the value of the canadian dollar. and our more recent research suggests that, with the substantial growth in our net trade surplus in energy since the early 1990s, energy prices now appear to have an influence ( also in the same direction ) on the value of the canadian dollar. so, with the boom in the prices of energy and non - energy commodities since 2003, we have seen a marked type one appreciation of our currency. but this is not the whole story. another factor driving the canadian dollar higher since 2003 has been a broad - based weakening of the u. s. dollar. the american dollar has fallen against many currencies as a result of concerns about the large and growing u. s. current account deficit. this situation cannot be sustained indefinitely, and investors appear to believe that a depreciation of the u. s. dollar is needed to help resolve this aspect of the " global imbalances. " this multilateral currency realignment

mark carney : opening statement for appearance before the house of commons standing committee on finance opening statement by mr mark carney, governor of the bank of canada, presented to the house of commons standing committee on finance, ottawa, ontario, 1 november 2011. * * * good morning. tiff and i are pleased to be here with you today to discuss the october monetary policy report, which the bank published last week. the global economy has slowed markedly as several downside risks to the projection outlined in the bank ’ s july mpr have been realized. volatility has increased and there has been a generalized retrenchment from risk - taking across markets. the combination of ongoing deleveraging by banks and households, increased fiscal austerity and declining confidence is expected to restrain growth across the advanced economies. the bank now expects that the euro area – where these dynamics are most acute – will experience a brief recession. the bank ’ s base - case scenario nonetheless assumes that the euro - area crisis will be contained, although this assumption is clearly subject to downside risks. we welcome the agreement announced last week by euro area leaders on a comprehensive plan to address the ongoing challenges in europe. we look forward to additional details on modalities of the various measures and to their implementation in the coming weeks. in the united states, real gdp growth is expected to be weak through the first half of 2012, reflecting diminished household confidence, tighter financial conditions and increased fiscal drag. growth in china and other emerging - market economies is projected to moderate to a more sustainable pace. these developments, combined with recent declines in commodity prices, are expected to dampen global inflationary pressures. the outlook for the canadian economy has weakened since july, with the significantly less - favourable external environment affecting canada through financial, confidence and trade channels. although canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year. household expenditures are projected to grow relatively modestly as lower commodity prices and heightened volatility in financial markets weigh on the incomes, wealth and confidence of canadian households. business fixed investment is still expected to grow solidly in response to very stimulative financial conditions and heightened competitive pressures, although it will be dampened by the weaker and more uncertain global economic environment. net exports are expected to remain a source of weakness, owing to sluggish foreign demand and ongoing competitiveness challenges, including the