As a medium-sized, open economy and an important producer of commodities, our terms of trade can shift significantly as the relative prices of commodities, manufactured goods, and services change. Such changes in relative prices are a signal to shift real resources out of sectors with declining profitability, and into sectors where profits are rising.
Under a floating rate regime, movements in the currency help to smooth that process and to minimize the adjustments in other areas of the economy. This all serves to demonstrate why it has been very important to us to maintain our flexible exchange rate, rather than fix our currency to the U.S. dollar.