In a bid to improve its ability to deal with a major disruption in foreign exchange markets, the federal government is further diversifying its foreign exchange holdings, federal finance minister Jim Flaherty announced Monday.
Flaherty said Canada will add pound sterling-denominated assets to the Exchange Fund Account (EFA), which currently holds U.S.-dollar, euro- and yen-denominated assets.
The move comes in response to an assessment by the Department of Finance and the Bank of Canada of the benefits of including additional currencies to its holdings, “to increase the liquidity of the portfolio and to be better positioned to respond in the unlikely event of a severe disturbance in exchange markets.”
Finance also notes that the inclusion of the British pound in the EFA is in line with the objectives of the portfolio, which are to “aid in the control and protection of the external value of the Canadian dollar and provide the government with foreign currency liquidity.”