Canada's Dollar Heads for Longest Slump in Three Years

Canada's dollar fell for a seventh day, its longest losing streak in three years, as economists forecast the central bank will cut borrowing costs tomorrow to avoid a recession in the world's eighth-largest economy.

The Canadian currency extended its decline from last week and dropped to the lowest in five weeks. The Bank of Canada will cut the key rate a quarter-percentage point to 2.75 percent tomorrow, according to the median forecast in a Bloomberg survey. A 25-basis-point reduction would lower the nation's interest-rate advantage over the U.S. to 0.75 percentage point.

Canada's dollar declined 0.3 percent to C$1.0223 per U.S. dollar at 1:35 p.m. in Toronto, from C$1.0196 on June 6. The currency fell to C$1.0242, the weakest since May 2.

The Canadian dollar depreciated for nine days during the period ended April 18, 2005, when it fell on concern opposition parties would call for a non-confidence vote to oust the governing Liberal Party over a kickback scandal. The currency weakened 4 percent during the month.

The Canadian currency has traded near parity with its U.S. counterpart this year. It touched a 2008 low of C$1.0379 on Jan. 22, and a high of 97.12 cents per U.S. dollar on Feb. 28.

The currency has declined 3.4 percent since May 29 as reports showed the economy unexpectedly contracted in the first quarter and net job growth slowed in May.

The nation's central bank cut borrowing costs a half- percentage point to 3 percent on April 22 as the U.S. economy slowed. Canada ships about 80 percent of its exports to the U.S.

Canada, Bloomberg
6/9/2008 12:14:07 PM