Canadian dollar slides against rallying greenback

Mon Sep 8, 2008 5:43pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar dipped against the U.S. dollar on Monday as renewed confidence in the U.S. financial sector following the U.S. government's takeover of the two biggest U.S. mortgage finance companies convinced investors to buy the greenback.

Canadian bond prices were mixed as investors considered the implications of the bailout of Freddie Mac FRE.N and Fannie Mae FNM.N.

The Canadian dollar ended the North American session at C$1.0647 to the U.S. dollar, or 93.92 U.S. cents, down from C$1.0633 to the U.S. dollar, or 94.05 U.S. cents, at Friday's close.

The currency spent the session in a wide range of C$1.0551 to the U.S. dollar, or 94.78 U.S. cents, to C$1.0715, or 93.33 U.S. cents.

Freddie Mac and Fannie Mae own or guarantee half of all outstanding U.S. mortgage debt, and the government bailout gave the market confidence that even if the worst of the U.S. housing crisis was not over, it would be contained.

The Canadian dollar initially held its own against the rallying greenback. But as the U.S. dollar strengthened, commodity prices, which investors had been buying into for a lack of better alternatives, fell and the Canadian dollar came off with them.

Canada is a major exporter of many key commodities and its currency is often influenced by the direction of their prices.

Commodity prices and moves in the greenback will remain the main drivers of the Canadian dollar over the short term, said David Bradley, director of foreign exchange trading at Scotia Capital.   Continued...