Canadian Dollar Drops to Six Week Low as Crude Oil Declines

By Jamie McGee

July 29 (Bloomberg) -- The Canadian dollar fell to a six- week low as crude oil traded near a two-month low, increasing concern that weakening commodity prices are signaling slowing economic growth.

The currency slumped for a sixth consecutive day as crude oil touched $124.45 a barrel. Oil has dropped 14 percent since hitting a record high of $147.27 a barrel on July 11. Alberta has the largest crude reserves outside the Middle East.

``The Canadian dollar has underperformed,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``It's a reflection of the oil prices coming off. That's taken a bit of the edge off the currency.''

Canada's dollar dropped 0.1 percent to C$1.0236 per U.S. dollar at 8:31 a.m. in Toronto, from C$1.0226 yesterday. The currency touched C$1.0254, the weakest since June 16. One Canadian dollar buys 97.69 U.S. cents.

The loonie will decline to C$1.06 by the end of the first quarter of 2009, according to the median forecast of 28 analysts surveyed by Bloomberg News.

The yield on the two-year bond was little changed at 3.06 percent. The price of the 3.75 percent security due in June 2010 was C$101.22. The 10-year bond's yield rose 1 basis point to 3.79 percent.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net