Canadian, Australian dollar in record declines

Posted August 9, 2008

The Canadian and Australian dollars are coming off a record-breaking losing streak. If commodities continue to fall, the drop could turn into a rout.

by Cordell Eddings, Bloomberg.com

Baltimore — (TFN): Canada’s dollar posted its biggest weekly loss since at least 1971 as a report showed employers unexpectedly shed jobs for a second month, raising speculation that the central bank may cut borrowing costs.

The currency weakened 3.9 percent this week as an index measuring its U.S. counterpart against six major trading partners reached the highest since February. The Canadian dollar dropped 1.4 percent against the U.S. dollar today, the biggest daily decline since March 19. Employers reduced payrolls by 55,200 positions, Statistics Canada said in Ottawa.

The currency fell to C$1.0672 per U.S. dollar at 2:32 p.m. in Toronto, from $1.0530 yesterday. It touched C$1.0696, the lowest since last August. One Canadian dollar buys 93.69 U.S. cents. “This is very worrisome,” said Michael Gregory, a senior economist in Toronto at the Bank of Montréal. “The expected slowdown in the Canadian economy is happening, and maybe happening a little more steeply even than the Bank of Canada was expecting.”

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*** Not to be outdone, the “other” favorite Hard Money currency, the Australian dollar also experienced a record decline. Bloomberg’s Ron Harui writes:

The Australian dollar fell for a ninth day, the longest losing streak since 1980, as traders increased bets the central bank will reduce borrowing costs from a 12-year high.

Australia’s currency headed for a third weekly loss, breaking through 90 U.S. cents for the first time in more than four months, as Reserve Bank of Australia Governor Glenn Stevens said on Aug. 5 that there was “scope to move towards a less restrictive stance of monetary policy” because of slowing consumer demand. The Australian dollar also declined after prices of commodities the nation exports such as crude oil and gold slid this week.

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