Canadian dollar unable to escape funk, ends lower

Thu Aug 7, 2008 4:55pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar skidded to a lower close versus the U.S. dollar for the 11th time in the past 12 sessions on Thursday and the sudden downturn for the once-resilient currency showed no signs of easing.

Canadian bond prices closed higher across the curve due to slew of factors including a Canadian building permits report that missed estimates and comments from the European Central Bank about weaker economic growth.

The Canadian dollar closed at C$1.0530 to the U.S. dollar, or 94.97 U.S. cents, down from C$1.0477 to the U.S. dollar, or 95.45 U.S. cents, at Wednesday's close.

After trading in a tight range versus the greenback for most of this year, the Canadian currency has fallen through key technical levels and has been unable to put a convincing end to its slump.

"It's one of those big turns in market sentiment that is the underlying thing here and I don't think there is anything specifically related to Canada that is behind this move," said Shaun Osborne, chief currency strategist at TD Securities.

"After having traded in a very tight range around parity for so long it feels a little but overdue in fact, and I think this probably has a little bit more to run here."

Concerns about global growth have crimped commodity demand in recent weeks and also weighed heavily on oil prices, which has hurt the Canadian dollar since Canada is considered a key exporter of oil.

But the latest drop in the Canadian dollar was due largely to a rally in the greenback, which hit a 5-1/2 month high versus a basket of major currencies after data that showed a surprise rise in U.S. home sales in June.   Continued...