Dollar falls towards 80 U.S. cents, lowest since January 23

Mon Feb 2, 2009 6:10pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar bounced off a one-week low hit earlier on Monday but still fell 1.4 percent versus the U.S. dollar as traders steered clear of risky assets ahead of key U.S. and Canadian jobs data later this week.

The Canadian employment report is expected to show the domestic economy continued to bleed jobs in January and support calls for more interest rate cuts by the Bank of Canada, which already lowered its key rate to a 50-year low last month.

"The market is waiting to see how January's data come out so they can assess whether or not this recession is deepening further or has reached a maturity," said Gareth Sylvester, senior currency strategist at HIFX Plc in San Francisco.

"There is a lack of risk appetite evident and that may remain the theme until the latter stage of this quarter when we can really say with a high degree of certainty what stage of this current recession we are in."

The Canadian dollar closed at C$1.2436 to the U.S. dollar, or 80.41 U.S. cents, down from C$1.2265 to the U.S. dollar, or 81.53 U.S. cents, at Friday's close.

The currency at one point fell to C$1.2467 to the U.S. dollar, or 80.21 U.S. cents, its weakest level since January 23.

Sylvester said the decision by traders to avoid riskier assets was also an extension of Canadian data released on Friday that showed the economy shrank more than expected.

On top of that, prices for oil fell nearly 4 percent due to gloomy projections for energy demand. The Canadian currency is often influenced by swings in oil prices as Canada is a key exporter of the commodity.   Continued...