Canadian Dollar Drops to Year Low as Commodities Prices Fall

By Cordell Eddings

Aug. 5 (Bloomberg) -- Canada's dollar fell to the lowest in more than a year as the prices of commodities including crude oil tumbled and the U.S. currency strengthened.

The loonie, as the currency is known because of the aquatic bird on the one-dollar coin, slumped for a fourth consecutive day. Commodities account for about half of the nation's exports, while the U.S. is Canada's biggest trading partner.

``The main catalyst has been weakness in commodity markets, most notably crude,'' said Jack Spitz, managing director of foreign-exchange trading at National Bank of Canada in Toronto. ``And they are still going lower which is fueling bearish sentiment in the Canadian dollar and broad-based demand for the U.S. dollar.''

The currency fell 0.7 percent to C$1.0437 per U.S. dollar at 8:08 a.m. in Toronto, from $1.0366 yesterday. The loonie touched C$1.0453, the lowest since Sept. 11. One Canadian dollar buys 95.80 U.S. cents.

Crude oil fell to $118 a barrel on speculation Tropical Storm Edouard will leave U.S. oil rigs and refineries undamaged and as other commodity prices tumble. Oil has lost almost $30 since touching a record of $147.27 a barrel in New York on July 11 as unprecedented fuel costs prompted consumers to limit spending on fuel.

After gaining 17 percent in 2007, the dollar is down 4.4 percent in 2008 amid a shrinking economy and a 15 percent drop in oil prices the past month. It's one of five of the 16 most- widely traded currencies to drop against the U.S. greenback, joining the New Zealand dollar, South Korean won, South African rand and British pound.

Canada's economy shrank 0.1 percent in May, as the extraction of natural gas slowed and car production dropped, Statistics Canada said last week in Ottawa. Economists surveyed by Bloomberg predicted a 0.2 percent expansion, according to the median of 24 estimates.

The Canadian dollar will weaken to C$1.09 by the end of 2009, according to the median estimate of 31 economists surveyed by Bloomberg News.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net