Canadian dollar falls on global growth concerns

Wed May 7, 2008 4:32pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar fell 0.4 percent against the U.S. dollar on Wednesday as investors worried that record high oil prices would begin to crimp global economic growth.

Canadian bond prices were higher as lower equity prices increased the safe-haven appeal of government debt.

The Canadian dollar closed at C$1.0070 to the U.S. dollar, or 99.30 U.S. cents, down from C$1.0029 to the U.S. dollar, or 99.71 U.S. cents, at Tuesday's close.

"The Canadian bulls are having second thoughts just blindly following the oil price higher," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

U.S. crude oil CLc1 hit a record $123.75 a barrel during the session, more than double what it cost a year ago. See <ID:nN0725103>

Higher oil prices are often a positive for the Canadian dollar as Canada is a major oil producer and exporter, but the new daily highs for the commodity are beginning to make investors nervous, Strauss said.

"It seems that this increased concern that these record high oil prices might weigh on U.S. and global growth is reflected in equity prices."

The main index on the Toronto Stock Exchange, which is heavily weighted with energy company shares, closed down 42.77 points, while New York's Dow Jones industrial average ended down 206.48 points.   Continued...

<p>A worker inspects a freshly pressed Canadian one dollar coin at the Royal Canadian Mint in Winnipeg on November 14, 2007. REUTERS/Fred Greenslade</p>