Dollar down more than a cent as equities weigh

Tue Feb 5, 2008 10:04am EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar shed more than a cent against the U.S. dollar on Tuesday, due in part to a stronger greenback and a negative view on world economic growth stemming from a rough start in the equities markets.

Domestic bond prices were higher on a flight to safety bid in response to the softer equity markets.

At 9:40 a.m. ET, the Canadian dollar was at 99.54 U.S. cents, valuing a U.S. dollar at C$1.0046, down from US$1.0067 to the U.S. dollar, or 99.33 Canadian cents, at Friday's close.

"Canada had a bit of a rocky night along with most currencies against the U.S. dollar, which had a pretty significant move," said Steve Butler, director of foreign exchange at Scotia Capital.

The strength in the greenback comes as investors take the view that the recent aggressive moves by the U.S. Federal Reserve will help prevent the U.S. economy from slipping into recession.

The Fed has cut its key lending rate by 225 basis points, to 3 percent, since September and the market is pricing in at least another 75 basis points of easing by the end of the year.

In that time, the Bank of Canada has cut its key lending rate by 50 basis points, to 4 percent, opening up a 1 percent interest rate differential. That initially gave the currency some strength, but has left it largely range bound.

"I don't think the market is too sure of what to do with the Canadian dollar yet," said Butler.   Continued...