Bank of Canada says recovery starting, Canadian dollar a risk

OTTAWA (Reuters) - An economic recovery is starting in Canada, but the strong Canadian dollar is offsetting many of the improvements reflected in recent data, Bank of Canada Governor Mark Carney said on Thursday.

In the prepared text of a speech he was delivering in New York, Carney said the growth was supported in part by central bank and government stimulus measures but also by household wealth, commodity prices, better financial market conditions and increased confidence.

"However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," he said, repeating the bank's pledge to hold benchmark interest rates at a record low until the end of June 2010.

Turning to the global current account imbalances that contributed to the financial crisis, Carney said any rebalancing requires all systemically important economies to adopt market-based exchange rates.

It is possible in the long term that other currencies in addition to the U.S. dollar will become reserve currencies, he said. Greater use of the International Monetary Fund's unit of currency, called Special Drawing Rights, could be one way of moving toward a global monetary system in which all major players have flexible exchange rates, he said. (Reporting by Louise Egan; Editing by David Ljunggren)