Canadian dollar takes a hit from weak equities

Mon Aug 25, 2008 4:47pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar slipped against the U.S. dollar in lackluster trading on Monday, as equity markets tumbled on credit market fears, lessening the appeal of North American assets and the demand for Canadian dollars to buy them.

Domestic bond prices, with no Canadian data to key off, rose as investors bought safe haven government debt in response to the falling stock markets.

The Canadian dollar closed at C$1.0509 to the U.S. dollar, or 95.16 U.S. cents, down from C$1.0486 to the U.S. dollar, or 95.37 U.S. cents, at Friday's close.

The currency stayed in a fairly tight range of C$1.0440 and C$1.0515, even while trading was thin, due to a market holiday in Britain, which tends to amplify moves.

"We're seeing some intraday trading, but a real reluctance to take the market in a trend-like direction," said Gareth Sylvester, senior currency strategist at HIFX Plc in San Francisco.

A negative tone in North American equity markets hurt the Canadian dollar, as financials sold off on both sides of the border on credit market fears, and the heavyweight energy sector of the Toronto Stock Exchange fell as oil prices fluctuated.

The currency had been higher against the greenback early on in the session, rising with oil prices, but its gains proved short-lived as U.S. crude oil CLc1 had a bit of a roller-coaster session, with its price moving from slightly positive to negative and back again.

Canada's oil sands contain the biggest deposit of crude outside the Middle East. Canada is also the biggest supplier of oil to the United States.   Continued...