Canadian dollar nears 11-month low as oil slides

Tue Aug 5, 2008 5:03pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar stumbled to its lowest level in nearly 11 months against the U.S. dollar on Tuesday as oil prices fell further from last month's record and put more focus on slowing global growth.

Domestic bond prices, with no Canadian economic data to consider until later this week, were dragged lower along with the bigger U.S. Treasury market after the Federal Reserve held its fed funds target rate steady at 2 percent.

The Canadian dollar closed at C$1.0419 to the U.S. dollar, or 95.98 U.S. cents, down from C$1.0240 to the U.S. dollar, or 97.66 U.S. cents, at Friday's close. The Bank of Canada did not provide a closing number for Monday because of a holiday.

Lower commodity prices, specifically oil, were behind the currency's latest slide and could continue to be a drag on the Canadian dollar with no floor in sight.

From last November to the start of this week, the currency had managed to stick in a range where US$1 had been worth between C$1.0342 and 97.24 Canadian cents.

That range was busted wide open in Tuesday's session as the Canadian dollar fell as low as C$1.0446 to the U.S. dollar, or 95.73 U.S. cents, which could force some experts to alter their forecasts for the currency.

"If this is a meaningful breakout after having traded in a tight range for so long, the risk is really that we'll see slightly weaker Canadian dollar levels," said Shaun Osborne, chief currency strategist at TD Securities.

"I'm a little concerned that we've had close to three weeks straight (U.S.) dollar gains here and no sign of a correction. So it is perhaps, from our perspective, starting to look a little bit stretched."   Continued...