Loonie at lowest level in four years

Mon Oct 27, 2008 4:51pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar closed at its lowest level against the U.S. dollar in more than four years on Monday as uncertainty about the global economy weighed on the commodity-linked currency.

Bond prices finished mostly higher as investors opted for more secure government debt as equity prices tumbled and global recession fears deepened.

The Canadian dollar closed at C$1.2889 to the U.S. dollar, or 77.58 U.S. cents, down 1 percent from C$1.2729 to the U.S. dollar, or 78.56 U.S. cents, at Friday's close.

Just after midday, the currency fell to C$1.2930 to the U.S. dollar, or 77.09 U.S. cents, its lowest level since September 2004.

The Canadian currency has fallen 17 percent in October as the global financial crisis has become more severe. Any small gains it has recorded have almost always been followed by drops.

The continued slide in the Canadian dollar has been pegged to a slew of factors that have included lower prices for the commodities that Canada exports, tumbling equity markets and the uncertain economic environment.

Adding to the drag was a selloff of many currencies versus the U.S. dollar as people were forced out of long positions, leaving the Canadian dollar to take the brunt of the selloff.

"A lot of people were probably overweight Canada or holding long Canadian dollar positions and I think we are still seeing an exodus from those positions," said Steve Butler, director of foreign exchange trading at Scotia Capital.   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>