Canadian dollar falls on weak oil, BoC warnings

Fri Oct 23, 2009 9:21pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar sank further against the greenback on Friday as warnings from the Bank of Canada that the currency's strength was a risk to economic growth weighed on investor sentiment.

On Thursday, Governor Mark Carney said in a news conference that intervention in currency markets was an option but also stressed the bank's main concern was controlling inflation.

That followed comments earlier in the week by the central bank that the surging currency was undermining Canada's economic recovery, which killed thoughts of an early interest rate hike and raised some concerns the bank might signal it would intervene in foreign exchange markets.

The comments sent Canada's dollar to a low of C$1.0546 to the U.S. dollar on Friday, or 94.82 U.S. cents. It recovered some of the losses to finish at C$1.0519 to the U.S. dollar, or 95.07 U.S. cents, down from C$1.0478 to the U.S. dollar, or 95.44 U.S. cents, at Thursday's close.

The Canadian dollar was down 1.3 percent for the week.

"The real driver was certainly the Bank of Canada," said Camilla Sutton, currency strategist at Scotia Capital.

Also tugging the currency lower was weakness in the price of oil, a key Canadian export, which fell to around $80 a barrel, while gold prices were also weaker.

"Commodity currencies are generally a little bit weaker and that's driven off equities being weaker," Sutton said.   Continued...