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CAD Loses on U.S. Economy Slowdown

August 4, 2008 at 11:53 by Andriy Moraru

Canadian DollarThe Canadian dollar continued its strong bearish trend today against the U.S. dollar as the currency traders began to realize that the commodity prices won’t hold up if the world’s biggest economy will continue to cool down.

Market participants predict 17 percent drop for the Canadian dollar (also called loonie) against its U.S. counterpart by the end of 2009. In 2007 the USD/CAD declined 17 percent, breaking the parity rate of the two currency for the first time since 1976.

In 2008 the loonie is down 2.8 percent already as the economic output declined in Canada and the commodity prices (especially oil) fell last month. Canadian dollar is one of the few of the most-traded currencies that dropped against the U.S. dollar.

Many analysts believed that the booming commodity and energy prices will keep loonie up despite other negative factors. Unfortunately those believes weren’t justified and some traders are now paying for them with their own money.

Canada’s GDP declined 0.1 percent in May. That will probably mean that the Bank of Canada will have to continue cutting its interest rate in order to support the national economy.

USD/CAD rose from 1.0265 to 1.0301 as of 9:49 GMT today. Last week it advanced from 1.0191 to 1.0271. That was the second straight week of growth for this currency pair.

If you have any questions, comments, or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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