Second, the foreign recession leads to lower interest rates abroad and, other things being equal, raises the value of the dollar, which in turn lowers U.S. exports and boosts U.S. imports. The dollar appreciation also puts downward pressure on U.S. import prices and, thereby, inflation. The extent to which foreign worries lead to safe-haven flows may add to the dollar’s strength.
David Dodge: Monetary policy report update Opening statement by Mr David Dodge, Governor of the Bank of Canada, at a press conference following the release of the Monetary Policy Report Update, Ottawa, Ontario, 13 July 2006.