Canada dollar knocked to lowest close in 2 months

Mon Mar 31, 2008 5:09pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar skidded to its lowest close in a little over two months on Monday given a tumble in oil prices and nagging concerns about what impact a weak U.S. economy will have on Canada.

Domestic bond prices ended slightly lower as Canadian data that showed the economy grew faster than expected in January was largely ignored given key jobs data due later this week.

The Canadian dollar closed at C$1.0265 to the U.S. dollar, or 97.42 U.S. cents, down from C$1.0215 to the U.S. dollar, or 97.90 U.S. cents, at Friday's close.

Fears that Canada's economy will be dragged lower by the U.S. downturn have been weighing on the Canadian dollar and contributed to its 3.4 percent drop in the first quarter of 2008.

Those concerns, along with a sharp pullback in oil prices dominated the session despite economic data released early on that showed Canada's economy rebounded in the first quarter.

"Overall it was risk aversion ultimately spilling over into weaker commodity prices that affected the Canadian dollar," said Matthew Strauss, senior currency strategist at RBC Capital Markets. "The data played second fiddle to the greater concerns about how the U.S. slowdown would affect the economy given our close ties with the U.S."

The commodity-linked Canadian dollar, whose decline in 2008 has been cushioned by record high commodity prices, was pulled lower in the latest session as oil prices fell $4 to below $102 a barrel.

The Canadian currency hit a session low of C$1.0293 to the U.S. dollar, or 97.15 U.S. cents, shortly after midday before it bounced back slightly in the second half of the session.   Continued...