Canadian dollar falls on oil prices and economic concern

Source: Exec Canada

Date :01/05/2008 07:18:53

The Canadian dollar fell nearly one percent against the U.S. dollar on Thursday.

Several factors – among them softer oil prices, general concerns about the health of the economy and the closure of many overseas markets for May Day – contributed to the drop.

Reuters reported at 9:10 a.m. that the Canadian dollar was at C$1.0169 to the U.S. dollar, or 98.33 U.S. cents, down from C$1.0072 to the U.S. dollar, or 99.29 U.S. cents, at Wednesday's close.

"We have slightly softer oil prices this morning, but we are still stuck in the trading range, so I don't foresee Canada selling off too much from here," said Steve Butler, director of foreign exchange at Scotia Capital.

The price of oil often influences the direction of Canada's currency as it is a major Canadian export. Butler said the market is also starting to wonder how much of the weakness from the U.S. economic downturn is spilling over into Canada.

Monetary stimulus

Bank of Canada Governor Mark Carney repeated to a parliamentary committee on Wednesday that Canada will likely need to add further monetary stimulus, but that it will depend on the evolution of the global economy and domestic demand. Carney is scheduled to appear before the Senate Banking Committee today.

Meanwhile, Canadian bond prices were slightly higher, but the move was subdued as investors held off from making any big moves ahead of key U.S. data on Friday. The U.S. Federal Reserve lowered its key lending rate by 25 basis points on Wednesday, and market players will by watching the U.S. data for clues as to future Fed moves.

May 1, 2008