Canada’s Currency Drops as U.S. Dollar Rallies, Crude Oil Falls

By Chris Fournier

Jan. 29 (Bloomberg) -- Canada’s dollar weakened as its U.S. counterpart gained against most major currencies after the Federal Reserve yesterday warned of a prolonged global slowdown, reviving aversion to higher-yielding assets.

“Price action was largely U.S. dollar-friendly and contributed to a better bid in dollar-Canada,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Softer equity and commodity valuations” will likely continue to weigh on Canada’s dollar, he said.

The Canadian dollar depreciated 0.4 percent to C$1.2161 per U.S. dollar at 7:51 a.m. in Toronto, from C$1.2109 yesterday. One Canadian dollar buys 82.23 U.S. cents.

The Fed’s statement yesterday indicated concern the worldwide economy is weakening “significantly.”

Crude oil for March delivery dropped 2.2 percent to $41.22 a barrel. Crude accounts for about a tenth of Canada’s export revenue.

The Canadian currency will weaken to C$1.26 against the U.S. dollar by the end of this quarter before rebounding to C$1.20 by the end of 2009, according to the median forecast in a Bloomberg News survey of 41 economists.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net