Canadian dollar stumbles on U.S. economic concerns

Thu Jan 31, 2008 10:59am EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was knocked back below parity versus the U.S. dollar on Thursday as concerns about a U.S. recession were heightened after economic data south of the border showed a jump in jobless claims.

Domestic bond prices followed the U.S. Treasury market higher right across the curve as the weaker-than-expected U.S. data overshadowed a domestic report on gross domestic product that met estimates.

At 9:35 a.m., the Canadian unit was at C$1.0059 to the U.S. dollar, or 99.41 U.S. cents, down from US$1.0068, valuing a U.S. dollar at 99.32 Canadian cents, at Wednesday's North American session close.

The fall in the Canadian dollar, after nearing a four-week high on Wednesday, immediately followed the U.S. report that showed weekly jobless claims were much higher than expected.

An economic slowdown in the United States would likely have a negative impact on Canada, which relies heavily on the U.S. market for consuming the bulk of its exports.

Getting lost in the shuffle was another piece of data that showed Canada's economic growth fell as expected to 0.1 percent in November from 0.2 percent in October.

"The initial jobless claims gave the market just enough reason to sell the Canadian dollar in an environment where they were looking for reasons to sell," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

"The U.S. data has renewed fears that labor market weakness could push the U.S. economy into recession."   Continued...