Canadian dollar falls on global growth concerns

Wed Apr 9, 2008 9:49am EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar fell against the U.S. dollar on Wednesday along with other commodity-linked currencies as fears that a slowdown in global growth could impact commodity prices.

Canadian bond prices, with no domestic data to influence direction, rose along with the larger U.S. market on credit and financial market concerns.

At 9:32 a.m. the Canadian dollar was at C$1.0182 to the U.S. dollar, or 98.21 U.S. cents, down from C$1.0133 to the U.S. dollar, or 98.69 U.S. cents, at Tuesday's close.

The currency tilted lower during the overseas session, as investors digested a downgrade to the International Monetary Fund's global growth forecast and Tuesday's dovish FOMC minutes.

An IMF report on Wednesday said the U.S. would tip into recession and world growth will fall to 3 percent or less.

The report comes after FOMC minutes released Tuesday showed the Fed is still worried that the credit crunch and the U.S. housing rut could plunge Canada's biggest trading partner into a period of prolonged weakness.

"The FOMC minutes were very much highlighting that the Fed does think that the U.S. is entering recession or is in recession and that growth will be negative," said Camilla Sutton, currency strategist at Scotia Capital.

Foreign exchange traders lightened up on commodity-linked currencies in response to the reports, as lower growth may lead to softer commodity prices. The Canadian, Australian and New Zealand dollars all lost around half a percent in early trading.   Continued...