Loonie slips on U.S. economic outlook

Wed Mar 26, 2008 5:09pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar slid lower against the U.S. dollar as investors were loath to bet on the currency, given Canada's heavy dependency on the waning U.S. economy.

Domestic bond prices, with no Canadian economic data to influence direction, ended mostly higher along with the larger U.S. market.

The Canadian currency closed at C$1.0188 to the U.S. dollar, or 98.15 U.S. cents, down from C$1.0173 to the U.S. dollar, or 98.30 U.S. cents, at Tuesday's close.

Early on in the session, rising oil prices helped the currency climb to C$1.0095 to the U.S. dollar, or 99.05 U.S. cents, which marked its highest level in a week.

Canada is a major oil producer and exporter, and rising oil prices have been a major factor in the currency's 60 percent rise since 2002.

But the currency slipped from its intraday high, even as oil prices pushed higher, due to concerns that the growing economic softness in the United States would weaken global growth and cut demand for commodities.

"The U.S. data has certainly deteriorated over the last week and that is weighing on the NAFTA bloc, as well as the procyclical currencies," said Camilla Sutton, currency strategist at Scotia Capital.

The worst performers among major currencies were the Canadian dollar and the Mexican peso, along with the commodity-linked New Zealand dollar.   Continued...

<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best</p>