Loonie hits 4-month low on stocks carnage
By John McCrank
TORONTO (Reuters) - The Canadian dollar closed at a four-month low against the U.S. dollar on Monday as stock markets around the world sank in response to fears of a U.S. recession, darkening the outlook for Canadian exports.
Canadian bond prices rallied on the equities selloff ahead of what is widely expected to be a Bank of Canada interest rate cut on Tuesday.
The Canadian dollar closed at 96.81 U.S. cents, valuing a U.S. dollar at C$1.0329, down from 97.33 U.S. cents, or C$1.0274, at Friday's close.
"With about 75 percent of Canadian exports destined for the U.S., a significant slowdown in growth south of the border will inevitably leave its mark on Canadian export performance, and hence GDP growth," said Jacqui Douglas, economics strategist at TD Securities, in a note.
That sentiment was echoed on the Toronto Stock Exchange, which shed more than 600 points on its way to its biggest one-day drop in seven years.
U.S. markets were closed for the Martin Luther King Jr. Day holiday, creating illiquid conditions and amplifying Toronto stock market moves, as well those as in Asia and Europe.
After a stellar 17.5 percent rise versus the greenback in 2007, the Canadian dollar has fallen 4 percent as concerns grow about what impact a global slowdown could have on Canada given the nature of its exports.
Canada is a producer and exporter of many key commodities, such as oil, gold, and base metals. Continued...