OTTAWA – The high-flying Canadian loonie may soon be joining the elite club of global reserve currencies.
The International Monetary Fund signalled in a new report it is considering asking foreign countries to report their holdings of Canadian and Australian dollars separately, which would technically make them global reserve currencies.
It would be the first addition to the list of five reserve currencies – the U.S. greenback, the Japanese yen, the euro, the British sterling and Swiss franc – since 1999.
Previously the two were lumped together in the “other currencies” category.
The notice was contained in an appendix of the new IMF report, which took note that at least two other countries held the Canadian and Australian dollars in their foreign reserves.
Bank of Montreal economist Doug Porter called the addition a “seal of approval” for Canada, but could carry some repercussions, both negative and positive.
“This more or less would make it official that Canada and Australia are seen as relatively safe harbours and places that countries feel comfortable keeping their foreign exchange (reserves) in,” he said.
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“I would suspect it could put even more upward pressure on the loonie, at least over the next year or two,” he added.
The value of the loonie has flirted with par for the past year as investors increasingly view Canada’s economy as a relatively safe harbour.
The loonie again traded above parity in markets Monday, a level that many exporters complain makes them uncompetitive in the global marketplace. The rise of the loonie in the past decade has also been blamed for the continued deterioration of Canada’s manufacturing sector in Ontario and Quebec.
A higher value for the loonie, however, is a positive for Canadian tourists, businesses that import machinery and equipment, and helps inflation in check.