Canadian dollar rattled by lower commodity prices

Thu May 1, 2008 4:55pm EDT
 
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was knocked down 1 percent to its lowest level in over two weeks versus the U.S. dollar on Thursday due mainly to a decline in prices for the key commodities that Canada produces.

Canadian bond prices outperformed the U.S. Treasury market and ended mostly higher across the curve after Bank of Canada Governor Mark Carney repeated his view that additional monetary stimulus will be required.

The Canadian dollar closed at C$1.0193 to the U.S. dollar or 98.11 U.S. cents, down from C$1.0072 to the U.S. dollar, or 99.29 U.S. cents, at Wednesday's close.

At one point during the session the Canadian dollar fell to C$1.0240 to the U.S. dollar, or 97.66 U.S. cents, which marked its lowest level since April 15.

Canada is a key producer and exporter of many commodities, so the domestic currency stood little chance of extending a three-session win streak since oil prices fell for the third straight day while gold prices hit a four-month low.

"We don't have to look any further than the commodity market," said Matthew Straus, senior currency strategist at RBC Capital Markets.

"It doesn't really matter which commodity you are looking at, all commodities are trading sharply down and that's left the commodity-based currencies under pressure, especially the Canadian dollar."

With no Canadian economic data due out until next week, the currency's direction will be dictated largely by events in the United States, notably the U.S. nonfarm payrolls report for April due out on Friday.   Continued...

 
<p>Newly pressed Canadian one dollar coins at the Royal Canadian Mint in Winnipeg November 14, 2007. REUTERS/Fred Greenslade</p>