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rfmcdonaldThis news item scared me.
So the Canadian dollar is no longer a petrocurrency. I can't say that I mind that, given the decidedly negative effect of the high dollar on the industries of central Canada. I also don't think I can saw that a relatively weak Canadian dollar will do all that much to bolster economic growth given the imminent arrival of what could be a global recession.
The loonie posted its biggest one-day decline on record Friday, falling almost five cents against the American dollar at one point, but began to rally in the last half-hour of trading.
The dollar fell as much as 4.87 cents in the afternoon to trade as low as 82.41 cents US, according to the Bank of Montreal's currency desk.
However, the dollar's value continued to bounce wildly. It had recovered more than 1.5 cents from its low within minutes. The loonie was at 84.28 cents US at 3:30 p.m., down three cents from Thursday.
The loonie has now lost more than one-quarter of its value since hitting an all-time peak of 110.3 cents US last November, after a rapid three-month rise that began in the summer of 2007.
According to the Bank of Canada's exchange rate website, the dollar hasn't fallen more than 3.38 cents US in one day in modern history. That occurred June 21, 1961.
The dramatic fall of the loonie this month reflects the impact of lower commodity prices, especially oil, along with weak economies around the world and concern that even Canada's sturdy banks are being effected by a global credit crunch.
An economic note from Scotiabank said the loonie is "showing no signs of ending its losing streak against the U.S. dollar."
The loonie is also being sideswiped by rising demand for the U.S. dollar as the United States government tries to borrow heavily in global money markets to finance its $700-billion bailout of banks.
Ironically, the greenback is currently in huge demand because of the U.S. troubles and global economic uncertainty.
Fund managers from around the world are buying up U.S. Treasury bills - historically considered one of the most conservative investments - and need American currency to do so.
That has resulted in a strengthening of the greenback against other currencies this month, including a drop of nearly 10 cents US for the Canadian dollar since it closed at 93.97 on Sept. 30.
So the Canadian dollar is no longer a petrocurrency. I can't say that I mind that, given the decidedly negative effect of the high dollar on the industries of central Canada. I also don't think I can saw that a relatively weak Canadian dollar will do all that much to bolster economic growth given the imminent arrival of what could be a global recession.
