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C$ At 4-Mo Lows As Economic Concerns Mount

Monday, January 21, 2008

Canada Morning: C$ At 4-Mo Lows As Economic Concerns Mount

TORONTO (Dow Jones)--The Canadian dollar is down at more new 4-month lows early Monday, as concerns about the Canadian and global economies continue to weigh on the currency notwithstanding the lighter-than-normal trading volumes from the close of U.S. markets for Martin Luther King Day.

The U.S. dollar was trading at C$1.0323 at 10:30 a.m. EST (1530 GMT), from C$1.0311 at 8:00 a.m. EST (1300 GMT) and C$1.0279 late Friday.

The Canadian dollar traded back through the C$1.0300 figure in overnight dealings and has been pressing up against new 4 month lows ever since, as bearish sentiment clings to the currency in light of major declines on non-U.S. equity markets Monday and also sizeable falls in oil prices.

The Toronto Stock Exchange thus far Monday has also been experiencing crushing losses, as fears of a U.S.-led recession continue to mount.

The Canadian dollar, as a commodity-sensitive or cyclical currency, is commonly sold off whenever concerns about flagging global growth proliferate, though currency players may limit the Canadian unit's losses ahead of some major announcements for the Bank of Canada this week.

The central bank will announce its latest interest rate decision early Tuesday, followed two days later by its monetary policy report update.

Until then however, the Canadian dollar will likely continue to suffer from concerns that Canada's economy is being undermined by slowing growth emanating from the U.S.

"Everybody's feeling very doom-and-gloom about the North American economy," said Steve Butler, director of foreign exchange at Scotia Capital in Toronto. "I don't think things in Canada are quite as bad as they are in the U.S., but the Canadian dollar's getting lumped into a bit of a sell North America trade at the moment."

Butler added that it has been somewhat surprising that the Canadian dollar hasn't declined further given the ragged state of commodity and equity markets, though technical resistance just above current levels and caution ahead of Tuesday's Bank of Canada rate announcement may be putting a lid on things for now.

These are the exchange rates at 10:30 a.m. EST (1530 GMT), 8:00 a.m. EST (1300 GMT), and late Friday.

   USD/CAD     1.0323     1.0311     1.0279
EUR/CAD 1.4344 1.4940 1.5021
CAD/JPY 102.65 102.70 103.80

Posted by MOHAMED SAID at 7:56 AM  

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