TORONTO: Canada's dollar slid almost a penny to its lowest in almost six weeks against the US currency on Monday, hurt by tumbling oil prices on global unease about a possible double-dip recession and twin debt crises.
The Canadian dollar fell as low as C$0.9880 to the US dollar, or $1.0127, its lowest since June 28.
Deep-rooted jitters after Standard & Poor's cut the US debt rating from its top-notch level on Friday sent world stocks towards a 11-month low, overshadowing relief that the European Central Bank was buying bonds of euro zone strugglers Italy and Spain. [MKTS/GLOB]
The price of oil, a key Canadian export, dropped about 4 percent to below $84 a barrel.
Investors were seemingly unimpressed by weekend talks between the Group of Seven industrialised countries aimed at safeguarding the smooth functioning of financial markets following the US debt rating cut to AA-plus from AAA.
The Canadian dollar, which was within striking distance of hitting a modern-day high not even a month ago, has lost 5 cents since late July, swept up in the global selloff of riskier assets.
"Certainly the backdrop has changed over the last little while," David Watt, senior currency strategist at RBC Capital Markets.
"I actually don't think that the S&P downgrade has that much of a direct impact, but it comes at a time when risk sentiment was decidely on edge."
At 8 a.m. (1200 GMT), it was at C$0.9861 to the US dollar, or $1.0141, down from C$0.9781 to the US dollar, or $1.0224, at Friday's North American session close.
Uncertainty over economic growth in the United States is a major factor putting pressure on the Canadian dollar, the US being Canada's biggest trading partner.
"Canada still has a number of safe-haven elements to it, but so long as you've got intense uncertainty about the US and global growth outlooks, they're not necessarily going to shine through," said Watt.
Government bonds pushed sharply higher, shaking off the S&P downgrade as stocks bore the brunt of the flight from risk.
Canada's two-year bond jumped 16 Canadian cents to yield 0.985 percent, while the 10-year bond climbed 82 Canadian cents to yield 2.548 percent.
Copyright Reuters, 2011
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