Loonie touches one-year low as oil skids

Tue Sep 2, 2008 4:59pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar fell to its lowest level against the greenback in more than a year on Tuesday, thanks to a slide in oil prices and a U.S. dollar that rallied against a number of major currencies.

Domestic bond prices, which were down early in the session, finished higher across the curve as dealers fled stocks in favor of more secure assets like government debt ahead of the Bank of Canada's interest rate announcement on Wednesday.

The Canadian dollar closed at C$1.0686 to the U.S. dollar, or 93.58 U.S. cents, down from C$1.0620 to the U.S. dollar, or 94.16 U.S. cents, at Friday's close.

The Bank of Canada did not provide an official close for the Canadian dollar on Monday due to the Labour Day holiday.

The currency retreated along with oil and gas prices on Tuesday after initial assessments showed that Hurricane Gustav had spared major U.S. production facilities in the Gulf of Mexico.

The aftermath of Gustav also allowed the market to focus more on slowing world energy demand and rising stockpiles, which are all negatives for the currency, because Canada is a key oil exporter.

During the overnight session the Canadian dollar dropped to C$1.0748 to the U.S. dollar, or 93.04 U.S. cents, its lowest level since mid-August 2007.

But even as oil prices bounced off their lows, the currency did not follow along as the greenback rallied against a slew of currencies, given concerns about major economies outside the United States.   Continued...

<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal in this April 28, 2006 file photo. REUTERS/Shaun Best</p>