Canada dollar hit by credit woes, lower commodities
TORONTO (Reuters) - The Canadian dollar fell on Monday, dropping briefly below parity with the U.S. dollar for the first time since February 25, dragged down by credit market woes, along with lower oil and base metal prices.
Canadian bond prices rose across the curve as investors sought the safety of government debt due to a rout on the Toronto Stock Exchange.
The Canadian dollar closed at US$1.0007, valuing a U.S. dollar at 99.93 Canadian cents, down from US$1.0140, valuing a U.S. dollar at 98.62 Canadian cents, at Friday's close.
The currency touched a low of C$1.0015 against the greenback, or 99.85 Canadian cents, towards the end of the session.
The Canadian dollar began to lose ground overnight along with the greenback as investors worried that recent emergency liquidity-boosting measures by U.S. Federal Reserve would not be enough to ease the strains in the U.S. financial system.
As the session wore on, the greenback managed make up some of its losses, but a drop in the prices of some key Canadian exports, including oil and base metals, left the Canadian dollar unable to find any traction.
The Fed's latest attempt to ease liquidity pressures came on Sunday, when it cut its discount rate by 25 basis points to 3.25 percent.
The move came as JP Morgan Chase (JPM.N: Quote) snapped up Bear Stearns BSC.N, made vulnerable by a cash crunch, for $2 a share, less than one-tenth of the bank's share price on Friday.
Recent domestic data has shown that the Canadian economy is still running at a quick clip, but most investors believe the effects of the U.S. economic downturn will make themselves felt in this country. Continued...