Dollar ends lower despite oil-price surge

Wed Apr 9, 2008 4:59pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar fell to its lowest level in a week versus the greenback on Wednesday as potential fallout from a deteriorating U.S. economic picture dominated sentiment despite record high oil prices.

Canadian bond prices, with no economic data to consider, ended higher across the curve as investors flocked to less risky investments due to nagging U.S. recession fears.

The Canadian dollar closed at C$1.0190 to the U.S. dollar, or 98.14 U.S. cents, down from C$1.0133 to the U.S. dollar, or 98.69 U.S. cents, at Tuesday's close.

Earlier in the session, the currency fell to C$1.0220 to the U.S. dollar, or 97.85 U.S. cents, its lowest level since April 2.

The latest fall for the commodity-linked Canadian dollar -- it has closed lower in four straight sessions -- came despite a rise in oil prices on Wednesday to more than $112 a barrel.

Lingering concerns about the credit market weighed on the U.S. dollar and dragged the Canadian dollar along for the ride since the Canadian economy relies on the United States as a market for the bulk of its exports.

"What we've got is a weak U.S. dollar and as opposed to that having a positive impact on Canada it actually had a negative impact because of the fear that the U.S. slowdown is going to spill over more definitively into Canada," said David Watt, senior currency strategist at RBC Capital Markets.

Watt said the Canadian dollar did not rally on the higher oil prices because the surge was not triggered by investors who feel confident that the global economic outlook is improving, a situation that normally would support the currency of a country that is considered a key oil exporter.   Continued...