Canadian dollar slips against well-bid greenback

Tue Sep 30, 2008 10:14am EDT
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*Canadian dollar slips 0.5 percent against greenback

*Energy production powers Canada GDP higher in July

*Canadian bonds unwind on hopes of bailout resurrection

TORONTO, Sept 30 (Reuters) - The Canadian dollar fell against a well-bid U.S. dollar on Tuesday as credit markets tightened in response to Monday's rejection of the $700 billion financial market bailout plan by U.S. lawmakers, sending investors scrambling to buy greenbacks.

Canadian bond prices unwound some of the big gains they made in the previous session on expectations that Washington would revisit the rescue plan and pass it.

At 9:54 a.m. (1354 GMT), the Canadian dollar was down 0.5 percent at C$1.0496 to the U.S. dollar, or 95.27 U.S. cents. That compared to C$1.0439, or 95.79 U.S. cents, at Monday's close.

The losses added to the 1.1 percent decline from Monday and put the currency down 1.2 percent for the month going into the last session of September.

One of the aims of the proposed $700 billion U.S. Troubled Asset Relief Plan was to help grease the wheels of money markets. Credit markets have seized up as financial institutions have collapsed under the weight of murky mortgage debt, and the ones that have survived are extremely cautious about lending to one another.

Under the TARP, the U.S. government would have bought up the bad debt, taking much of the risk away from lenders.   Continued...