TORONTO (Reuters) - Canada's finance minister and central bank chief are discussing the U.S. dollar weakness with G20 colleagues and expect currency issues to dominate talks at the group's meeting in South Africa next week, Finance Minister Jim Flaherty said on Thursday.
"If you stand back and look at the broader issue, it (the U.S. dollar's decline) is about global imbalances. It's about inflexibility in some currencies, particularly some of the large Asian currencies...,"Flaherty told reporters.
A day after Canada's dollar rose to its highest level against the U.S. dollar since the 19th century, Flaherty said he was concerned the never-imagined strength of the currency could have damaging effects on the Canadian economy.
He said policy-makers had discussed currencies and global imbalances at Group of Seven meetings last month and expected it to continue to dominate international meetings.
"These are matters that Secretary Paulson and I have discussed. They're matters that we've discussed at the G7, the G8 and the G20," Flaherty said, referring to U.S. Treasury Secretary Henry Paulson. "I'm sure it's going to be top (of) the agenda when we gather next week in Cape Town."
Flaherty said Canada had borne a third of the brunt of the U.S. dollar's depreciation. "This imbalances issue is important," he said. "This has a serious effect on Canada and it's something we're discussing with the Americans and with the other members of the G7 and G20."
Officials from leading and emerging markets will hold their annual G20 forum in Cape Town, South Africa, on November 17-18. All major central bank governors are scheduled to attend, including U.S. Federal Reserve Chairman Ben Bernanke, European Central Bank President Jean-Claude Trichet and Zhou Xiaochuan, governor of the People's Bank of China.
Prime Minister Stephen Harper expressed concern over the strong Canadian dollar for the first time on Wednesday, saying it required some reflection.
Amid loud calls for lower interest rates to alleviate some of the pressure on exporters from the rising currency, Flaherty said he has no role in conducting monetary policy although he meets regular with Bank of Canada Governor David Dodge and spoke with him this week.
(Reporting by Jonathan Spicer and Stefanie Kranjec; Writing by Louise Egan; Editing by Frank McGurty)
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