Canadian dollar tumbles below 80 U.S. cents

Wed Oct 22, 2008 4:54pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was whacked to its lowest level versus the U.S. dollar in more than three years on Wednesday as softer oil prices and a surge in the greenback combined to knock the currency below 80 U.S. cents.

Bond prices closed higher across the curve as the latest data out of Canada, including the August retail sales report, missed estimates, while the equity market resumed its slide and prompted investors to snap up more secure government debt.

The Canadian dollar closed at C$1.2547 to the U.S. dollar, or 79.70 U.S. cents, down 3 percent from C$1.2137 to the U.S. dollar, or 82.39 U.S. cents, at Tuesday's close.

During the session, the Canadian currency dropped as low as C$1.2600 to the U.S. dollar, or 79.36 U.S. cents, a move blamed largely on a stronger greenback as investors liquidated riskier assets. Lower oil prices also played a role.

"Stand out of the way of this freight train," said Steve Butler, director of foreign exchange at Scotia Capital. "You just cannot call an end to this move at this moment or a bottom for the Canadian dollar."

Butler said the speed and depth of the Canadian dollar's fall surprised him, but that the turbulence in the market has been longer and more severe than anyone had anticipated.

On the heels of its 17.5 percent surge last year, when it rose above the U.S. dollar for the first time in more than 30 years, the Canadian dollar is now down 21 percent this year.

The latest slide in the currency followed Tuesday's Bank of Canada decision to cut its key overnight rate by 25 basis points, slash its projections for economic growth and inflation, and suggest that more rate cuts are on the horizon.   Continued...