C$ nears 3-week low as commodities, stocks fall

Mon Oct 26, 2009 3:03pm EDT
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By Frank Pingue and Jeffrey Hodgson

TORONTO (Reuters) - The Canadian dollar fell to its lowest level in nearly three weeks on Monday, as a drop in commodity prices and retreating global stocks added to losses triggered by recent central bank comments on the currency.

North America stocks had initially opened higher, but reversed direction as commodity prices fell and risk aversion increased .N.TO, prompting investors to look to the safety of the U.S. dollar.

"The whole world got very unsafe very quickly this morning," said Steve Butler, director of foreign exchange trading at Scotia Capital.

"Stock markets turned around very dramatically and in the same breath the U.S. dollar turned around very dramatically and so we've seen a big shoot-up in the U.S. dollar and it's hurt almost every currency ... Canada was no exception."

The Canadian dollar often trades based on the risk appetite of global investors and prospects for the country's commodity exports.

Oil fell more than 2 percent to below $79 a barrel on concerns that a sluggish economic recovery will keep global demand low. Gold also hit a 10-day trough.

At mid-afternoon, the Canadian dollar fell to C$1.0698 to the U.S. dollar, or 93.48 U.S. cents, its lowest since October 6, and down from C$1.0519 to the U.S. dollar, or 95.07 U.S. cents, at Friday's close.

The currency had already taken a hit last week after the Bank of Canada and Governor Mark Carney warned that a rally toward parity with the greenback was a risk to growth and mentioned the possibility of intervention.   Continued...