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article imageLoonie Takes a Dip

By Bob Ewing     Aug 5, 2008 in Business
The Canadian dollar took a slide mostly due to investor fears over slumping oil prices- falling 1.3 cents US to 96.02 cents.
Investors are dumping the Canadian loonie due to their perception that Canada's economy will be hurt if crude oil prices keep slipping worldwide. The dollar fell 1.3 cents US to 96.02 cents US in mid-morning trading.
Oil has fallen to below $118 US a barrel, almost 20 per cent off of its all-time high of $147 US, reached less than four weeks earlier.
Consumers appear set to cut their driving and spend less overall because of rising energy prices. This means future demand for crude oil might drop.
Canadians experience higher oil prices similar to consumers elsewhere, however, Canadian industry benefits from soaring crude because this country is a major oil producer.
Thus, dipping crude prices make Canada's dollar less interesting to foreign buyers.
The market seems to believe when the U.S. Federal Reserve Board meets on Tuesday, the central bank will recommend that U.S. interest rates remain put.
Investors had initially thought that the U.S. Fed might cut rates to boost the flagging American economy and this would have made the Canadian dollar relatively attractive to currency buyers.
If the U.S. central bank leaves rates alone for the time being, this will add support to the American greenback compared to the Canadian dollar.
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