Canada dollar sags on commodities, bonds mixed

Fri Mar 28, 2008 5:08pm EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar ended lower against the U.S. dollar on Friday as commodity prices fell and worries persisted about the health of the U.S. economy and the potential for spillover effects on Canada.

Canadian bond prices ended mixed, but mostly higher, as investors squared their books ahead of month's end.

The Canadian currency closed at C$1.0215 to the U.S. dollar, or 97.90 U.S. cents, down from C$1.0184 to the U.S. dollar, or 98.19 U.S. cents, at Thursday's close.

For the week, the Canadian dollar eked out a 0.002 percent gain.

The currency has been unable to attract the attention of buyers, despite robust prices for commodities, which make up roughly half of Canadian exports. Commodity prices were lower on Friday, but remained near recent record highs.

The range-bound Canadian dollar has been shackled by fears that a deep U.S. downturn could hurt demand for commodities and derail Canada's economic growth.

BMO Capital Markets pointed out in a note to clients that according to the IMF, each percentage point decline in U.S. growth reduces Canadian GDP by one-half to three-quarters of a percent due to weaker exports and lesser funding, as Americans provide about one-quarter of the capital raised by Canadian corporations.

Canadian exports in the fourth quarter plunged the most since the 2001 U.S. downturn.   Continued...