Loonie tumbles on global recession fears

Fri Oct 24, 2008 9:18am EDT
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TORONTO (Reuters) - The Canadian dollar fell on Friday to its weakest against the U.S. dollar since September 2004 as equities markets fell sharply on a growing conviction that a global recession is inevitable, sending investors to the greenback in a safe-haven play.

Domestic bond prices rallied as the plunge in stocks increased the demand for relatively stable government debt.

At 8:58 a.m. EDT, the Canadian dollar was down 1 percent against the U.S. dollar at C$1.2687, or 78.82 U.S. cents, from C$1.2557 to the U.S. dollar, or 79.64 U.S. cents, at Thursday's close.

The currency fell as low as C$1.2848 to the U.S. dollar, or 77.83 U.S. cents, its lowest since September 2004.

"Right now there's absolute panic in the market again as the stock markets have come in so sharply lower," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"I think people are just flighting to the safety play, which is the U.S. dollar."

Overseas stock markets took steep losses and U.S. equity futures fell so sharply that they had to be frozen at several points as traders worried a global recession was at hand.

In the overseas session, data showed the British economy contracted for the first time in 16 years in the third quarter, fanning fears of a global recession.

That sent foreign exchange investors away from the Canadian dollar, as demand for the natural resources Canada exports was seen falling off.   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>