Loonie skids to weakest since 2004

Thu Oct 23, 2008 12:40pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar skidded to a 4-year lower versus the U.S. dollar on Thursday as investors liquidated riskier assets in favor of the greenback, leaving the domestic currency pinned below 80 U.S. cents.

Domestic bond prices were mostly higher across the curve, relishing in their role as a safe-haven investment as fears of a global recession persist.

At 9:35 a.m. EDT, the Canadian unit was at C$1.2670 to the U.S. dollar, or 78.93 U.S. cents, down from C$1.2547 to the U.S. dollar, or 79.70 U.S. cents, at Wednesday's close.

Earlier, the Canadian currency fell to C$1.2740 to the U.S. dollar, or 78.49 U.S. cents, which was its weakest since October 2004, but the move was blamed on investors being forced to liquidate assets rather than the usual fundamentals.

"Were just seeing a wave of liquidations by funds and that means they are basically selling anything they can sell, anything that isn't bolted down, and that includes relatively solid currencies like the Canadian dollar," said Doug Porter, deputy chief economist at BMO Capital Markets.

"Personally I think it's way overdone and we are going to see at some point, it may take awhile, but we are going to see a snap-back. But I don't think anybody wants to stand in the way of this move."

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 21.7 percent this year.

Traders will keep an eye on the Bank of Canada's Monetary Policy Report due out at 10:30 a.m., but the blunt tone of its statement from earlier this week leaves the chances of any surprises very small.   Continued...

<p>Canadian currency in the form of one dollar coins, otherwise known as loonies, are displayed in this posed photograph in Toronto, October 22, 2008. REUTERS/Mark Blinch</p>