Dollar slips on oil, subprime rumors

Mon Jan 7, 2008 5:15pm EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar ended Monday's North American session at a 2-1/2 week low against the U.S. dollar as falling oil prices and some unsubstantiated rumors of a big writedowns at a Canadian bank combined to sour sentiment towards the currency.

Canadian bond prices ended higher in response to steep losses on the Toronto Stock Exchange, which prompted investors to seek the safety of government debt.

The Canadian dollar closed at C$1.0056 to the U.S. dollar, or 99.44 U.S. cents, down from C$1.0013 to the U.S. dollar, or 99.87 U.S. cents, at Friday's close.

Canada is a major producer and exporter of oil and a 2.9 percent slide in U.S. crude oil prices CLc1 was a factor in the Canadian currency's decline, said David Bradley, director of foreign exchange at Scotia Capital.

NYMEX crude, which reached a record high of $100.09 a barrel last Thursday, closed at $95.09 a barrel on Monday due to persistent global economic fears and a forecast for warm weather in the United States, which would curb heating demand.

The currency and Canadian stocks were also hammered by a rumor that one of the big Canadian banks was set to announce an $11-billion writedown related to the U.S. subprime mortgage mess.

The rumor prompted Toronto-Dominion Bank, the only one of Canada's big six banks with no subprime-related writedowns, to repeat that has no subprime exposure.

On the central bank front, Bank of Canada Governor David Dodge said a Canadian dollar in the low to mid 90 U.S. cent range would be "totally justified in terms of the historical relationships between the terms of trade, domestic performance, and so on," news agency Market News reported.   Continued...