Three cheers for Bank of Canada governor Stephen Poloz. His is the only arm of the government in this economic slump that is trying to fight unemployment.

Poloz is doing so by talking down the Canadian dollar. Since 2009, the sky-high loonie has crippled Canadian manufacturers trying to sell in the U.S.

Over four years, it shot up from about 77 cents (U.S.), at one point reaching par with its American counterpart and then settling back into the 95-cent range.

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Now it has begun to slip again. With luck, it will end back up at roughly 80 cents. Under the purchasing power parity rule, which compares the prices charged for identical goods in two countries, that’s about where it should be.

Poloz’ contribution to the dollar’s decline has been to talk. He doesn’t actually say the currency should fall. But, in media interviews and in his latest monetary report, the central bank chief has made two things clear.

First, he’s not worried about inflation. In fact, with the cost of living increasing at just over one per cent annually, he says he is worried more by the spectre of falling prices, otherwise known as deflation.

That means he won’t raise the central bank’s trend-setting interest rate. In fact, he may lower it.

Second, he’s allowed himself to express pleasure about the effect of the lower dollar on Canadian manufacturing exports.

The message to the markets is clear: Canada isn’t about to do anything that might interfere with the loonie’s decline.

The Bank of Canada insists that it isn’t deliberately trying to push the currency one way or another. And technically, it is telling the truth. The classic method for driving down the dollar would be for the bank to literally print more currency to sell in foreign exchange markets. There’s no evidence it has done this.

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Indeed, under its own rules, it would have to issue a press release if it had intervened in this manner

But the central bank has always been cagey. It knows that markets parse the governor’s every utterance and that traders will view his exchange-rate insouciance as a signal indicating where he wants the dollar to go.

There are more fundamental reasons behind the dollar’s decline. One is that commodity prices are easing world-wide – which means there is less demand for the currencies of countries, like Canada, that export natural resources.

Another is that the U.S. dollar is rising – largely because traders expect that country’s central bank, the Federal Reserve, to hike interest rates. (So-called hot money tends to flow into whichever country offers the highest yield).

So in that context, Poloz is merely helping to push along a process already in play.

Still, it’s a welcome and overdue move.

While countries rarely admit to depreciating their currencies in order to gain commercial advantage, many do so.

Japan’s yen, for instance, has fallen by about 19 per cent against the U.S. dollar over the past year – the result of what Tokyo says is a new policy to fight deflation at home.

The U.S. itself has effectively engaged in competitive devaluation over the past four years. But like Japan, it insists that its program of quantitative easing (printing money) was designed for other purposes.

By contrast, Canada’s Conservative government did nothing as the loonie soared and Ontario suffered. Anyone who suggested a link between the petro-fueled high dollar and the woes of domestic manufacturers was labeled by the government and its supporters as anti-Alberta.

When New Democratic Party leader Tom Mulcair compared Canada’s currency problems to a similar malaise that affected Holland in the ‘70s, he was dismissed as a treasonous crank.

Now, finally, someone in Ottawa is doing something about the dollar. Talking down the loonie won’t be sufficient to end the slump. But in the context of a government that is otherwise doing nothing useful to combat unemployment, it is welcome.

Thomas Walkom's column appears Wednesday, Thursday and Saturday.

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