Dollar slides on oil, bonds dip

Mon Feb 4, 2008 9:38am EST
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By John McCrank

TORONTO (Reuters) - The commodity-based Canadian dollar slid against the U.S. dollar on Monday as crude oil prices were hit by fears that a global economic downturn could crimp energy demand.

Domestic bond prices, lacking any Canadian data releases to influence direction, eased slightly as investors took some profits.

At 9:12 a.m. EST, the Canadian currency was at US$1.0040, valuing a U.S. dollar at 99.60 Canadian cents, down from US$1.0060 to the U.S. dollar, or 99.40 Canadian cents, at Friday's close.

The main reason for the Canadian dollar's decline from Friday's levels is a slip in U.S. crude oil prices which touched briefly below $89 a barrel, said Adam Cole, currency strategist at RBC Capital Markets in London.

Canada is a key oil producer and exporter and much of its currency's 60 percent run-up since 2002 has been in line with rising crude prices.

Crude prices have fallen more than 10 percent from the record high of $100.09 a barrel, which it hit on January 3, on fears that a global economic downturn could crimp demand.

The price of gold XAU=, another key Canadian export, fell more than 1 percent, to around $901 an ounce, in response to a firmer greenback.

Movement in the Canadian dollar has largely been dictated by what the equities markets have done as of late, as the market looks to them as a barometer on global growth.   Continued...