Canadian dollar rattled again by lower oil prices

Wed Jun 4, 2008 4:48pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar fell against the U.S. dollar for a fourth straight session on Wednesday due to another retreat in oil prices and a report suggesting the Bank of Canada should continue cutting interest rates.

Canadian bond prices followed the U.S. Treasury market lower across the curve after two pieces of U.S. economic data topped estimates, but the slide was contained ahead of Friday's key Canadian and U.S. jobs reports.

The Canadian dollar closed at C$1.0183 to the U.S. dollar, or 98.20 U.S. cents, down from C$1.0086 to the U.S. dollar, or 99.15 U.S. cents, at Tuesday's close.

The currency fell to its lowest level in a month late in the session and is down nearly 3 percent since last Thursday's session close.

Oil prices fell further from the record high reached last month in what is starting to look like a trend, and that was being blamed for the latest retreat in the commodity-linked Canadian currency. Canada is a major oil producer and exporter.

"I'd still be cautious about calling for an end to the strength in oil prices but at least for the time being it looks like some of the heat is coming out of the oil market," said Doug Porter, deputy chief economist at BMO Capital Markets. "And I think that's been the biggest influence today."

Comments from U.S. Federal Reserve Chairman Ben Bernanke late in the afternoon gave a bid to the U.S. dollar and were enough to send the Canadian dollar to its lowest level since May 5.

Bernanke, in a speech at Harvard University, said rising long-term inflation expectations were a significant concern for policymakers.   Continued...