Dollar skids to 4-month low

Wed Jan 16, 2008 9:01am EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar fell to a 4-month low versus the U.S. dollar on Wednesday morning as concerns about a global economic slowdown rattled global stock markets and took the domestic currency along for the ride.

Domestic bond prices rose across the curve as fears of a U.S. recession convinced investors to bail out of risky investments in favor of secure assets like government debt.

At 8:35 a.m. EST , the Canadian unit was at 97.78 U.S. cents, valuing a U.S. dollar at C$1.0227, down from 98.37 U.S. cents, or C$1.0166, at Tuesday's close.

The Canadian dollar dropped to 97.24 U.S. cents overnight amid concerns about a possible U.S. recession, the impact that could have on the global economy and how that could sap demand for Canada's key commodity exports.

"The fear of a U.S. recession is one thing, but fears that it could go global is something else since Canada has been so dependent on commodity prices for so long," said David Watt, senior currency strategist at RBC Capital Markets.

Watt also said the Canadian dollar, whose performance was largely influenced by oil and gold prices as it rose last year, had become more closely linked with equity markets in 2008.

Equity markets have been under pressure since the start of the new year, weighed down largely by U.S. economic concerns and weak corporate earnings.

The Canadian dollar is down 3.2 percent in 2008 following a banner year in 2007 when it soared 17.5 percent against the greenback and topped parity for the first time since 1976.   Continued...