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The Royal Canadian Mint’s 2012 lucky loonie coin.JEFF McINTOSH/The Canadian Press

Ottawa and the Bank of Canada should take a page of the Swiss playbook and intervene to thwart speculative moves in the loonie, according to a new study by the Mowat Centre at the University of Toronto.

"The federal government and Bank of Canada have the tools to make Canada a less hospitable destination for speculative investment tied to the price of oil," author and economist Peter Spiro argues in the 31-page report, More Stability, Please: A New Policy Approach to Canada's Exchange Rate.

A speculative influx of investment cash has artificially inflated the value of the dollar, causing havoc to Canadian manufacturing and exports, particularly in Ontario, according to Mr. Spiro.

"There is no doubt a sense of national pride that comes with having a strong currency," he argued. "However, it is incumbent on the Bank of Canada to swallow its pride and admit that the Canadian economy cannot afford it."

The Bank of Canada should make clear that it won't accept an "unlimited range of deviation" for the dollar and will step in if necessary to thwart speculative moves. The central bank could also use quantitative easing to lower interest rates and make the dollar less attractive

The Swiss National Bank, for example, set a ceiling in 2011 for the euro-swiss franc exchange rate and said it would buy up foreign currency to enforce the band.

The Swiss franc rose anyway, but by less than the swings experienced by the Canadian dollar, Mr. Spiro pointed out.

"The dollar is not locked into petro-currency status," he said.

"If the Bank of Canada is willing to take a more interventionist approach, it is likely that it would be able to assert greater control over the dollar, and steer the economy to a path less damaging to exports of non-oil goods and services."

Ontario, in particular, has been hammered by the high dollar. Mr. Spiro says the strong currency has hammered exports and devastated manufacturing.

"Severe under- and over-valuations of the currency are unhealthy for the economy, as they cause dislocations and inefficiency," according to the report.

Mr. Spiro conclusions run counter to a string of reports from the Bank of Canada, the C.D. Howe Institute, the Macdonald-Laurier Institute and elsewhere, which have concluded that the high dollar is only part of the problems facing manufacturers.