Higher interest rates, generally speaking, will cause the dollar to INCREASE, not decrease.  Similarly they will tend to decrease inflation, not increase it.

The reason why the interest rate is so low is two-fold:

1. The government doesn't see inflation as a problem right now (theoretically at leas this is the sole mandate of the Bank of Canada when it comes to interest rates).

2. The rate is being kept low to keep the Canadian dollar low (and therefore keep wages lower in global terms) in an effort to "create jobs".

The real problem I see with all this is that we've had interest rates at emergency-low levels for more than 8 years now despite the fact that we're currently near the peak of a global economic cycle..  This leaves us with very few monetary options available to tackle the NEXT period of global economic weakness when it hits.