Canadian Dollar Falls Versus Euro


The Canadian dollar fell against the euro, snapping a three-day winning streak, on concern a deepening U.S. economic slowdown will spill into Canada.

At the same time, Canada's currency rose further against the U.S. dollar as traders increased bets the Federal Reserve will cut benchmark interest rates by a half-percentage point. The U.S. is Canada's largest trading partner.

The currency fell 0.3 percent to C$1.4849 per euro at 11:05 a.m. in New York, from C$1.4802 on Jan. 25. The Canadian dollar, dubbed the loonie after the image of the bird on Canada's one- dollar coin, rose to C$1.004 versus the U.S. dollar, from C$1.0082. One Canadian dollar buys 99.63 U.S. cents.

The loonie rose 1.9 percent versus the U.S. dollar last week as the Bank of Canada cut interest rates to 4 percent from 4.25 percent on Jan. 22. The central bank may reduce borrowing costs another half-percentage point by the end of March, Sutton said. Policy makers will cut the benchmark overnight lending rate to 3.25 percent by June, according to median estimate of 17 economists in a Bloomberg survey.

The European Central Bank's benchmark interest rate is 4 percent. The ECB will leave rates unchanged at their next meeting on Feb. 7.

Traders are concerned that Canadian interest rates following U.S. borrowing costs will make Canada's bonds and other fixed-income investments less appealing.


TradingEconomics.com, Bloomberg
1/28/2008 9:22:40 AM