Canadian dollar falls, heads to one of worst weeks

By John McCrank

TORONTO (Reuters) - The Canadian dollar was heading toward its worst week in 38 years against the U.S. dollar on Friday as tight liquidity put a premium on the greenback and nervous investors awaited a vote in U.S. House of Representatives on a revised rescue plan for the financial sector.

Bond prices dipped as cautious optimism surrounded some U.S. employment data, which was worse than expected on the headline number, but not as bad as many feared on the unemployment rate.

At 10:14 a.m. EDT, the Canadian dollar was at C$1.0829 to the U.S. dollar, or 92.34 cents, down from C$1.0799 to the U.S. dollar, or 92.60 U.S. cents, at Thursday's close.

The currency is down 4.6 percent so far this week, its biggest weekly plunge since at least 1970, according to Thomson Reuters data. It is sitting at its weakest point since August 16, 2007.

Delays in taking action on the proposed $700 billion bailout plan for the U.S. financial sector has caused a tightening in credit markets. That has put a bid to the U.S. dollar as lenders, worried about more big bank defaults and their cascading effects, hold on to their cash tightly.

The U.S. House of Representatives is expected to vote on revised version of the rescue package later on Friday after its surprise rejection of the first version of the plan earlier this week, which sent markets into panic mode.

"I think the general trends we've seen in place over the last couple weeks are likely to continue here and the market at this point is probably going to step back and wait for the results of the vote," said George Davis, chief technical strategist at RBC Capital Markets.

U.S. jobs data highlighted the impact of the current economic downturn, with the steepest job losses in 5-1/2 years in September as employers cut 159,000 nonfarm jobs from their payrolls. Analysts had expected a loss of 100,000 jobs.