Dollar sags as oil slips, greenback rallies

Thu Sep 4, 2008 4:52pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar weakened against U.S. dollar on Thursday, giving back all its gains from the previous day as oil prices fell and the greenback rallied.

Domestic bond prices, with no Canadian data to influence a move, rallied on a safe-haven bid as equity markets suffered steep losses.

The Canadian currency ended the North American session at C$1.0695 to the U.S. dollar, or 93.50 U.S. cents, down from C$1.0610 to the U.S. dollar, or 94.25 U.S. cents, at Wednesday's close.

The currency started the session on a positive note, rising to C$1.0542, or 94.86 U.S. cents, as the price of U.S. crude jumped ahead of weekly U.S. inventory data.

But oil prices fell as concerns about weakening demand due to softening global growth overshadowed the inventory report, which showed a surprise drawdown in weekly U.S. crude stocks.

With Canada a major energy producer and exporter, the currency is often strongly influence by oil price movements.

Shaun Osborne, chief currency strategist at TD Securities, said the weaker Canadian dollar was largely the result of a rallying greenback.

"There are a fair amount of people out there who are not involved in this U.S. dollar rally at the moment but want to be, so that's going to provide, I think, a natural source of demand for the (U.S.) dollar on any decent pullback that we get," he said.   Continued...