Dollar back to parity as oil slides

Sat Dec 1, 2007 2:09am EST
 
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By John McCrank

TORONTO (Reuters) - The Canadian dollar fell to its lowest level since early October against the U.S. dollar on Friday as commodities prices sagged anew and Canadian economic growth data left investors uncertain about the prospect of an interest rate cut next week.

Domestic bond prices headed lower after the third-quarter gross domestic product report.

At 11:24 a.m. (1543 GMT), the Canadian dollar was at par with the U.S. dollar, down from US$1.0028, or 99.72 Canadian cents, at Thursday's session close.

Technical selling triggered a slump in U.S. crude oil prices CLc1 to below $89 a barrel, which was negative for Canada's commodity-linked currency. And spot gold prices XAU= also dropped sharply, to around $784 an ounce, partially due to the lower energy prices.

The drop in commodities prices overshadowed news that Canada's economy grew more than expected, to an annualized 2.9 percent in the third quarter.

After the data was released, the Canadian dollar firmed, briefly rising to around US$1.006 from pre-data levels of 1.004, before falling back.

"I think it was a surprise to the market, but the reaction was fairly muted in dollar-Canada," said David Bradley, director of foreign exchange at Scotia Capital.

"There are more reasons to be selling Canada, I think, so we had an initial move (higher), but we came back bid quickly."   Continued...