Canadian Dollar Hits All-Time Low
TORONTO (AP) -- Weakened by the Asian flu, the Canadian dollar Thursday fell to the lowest level in its 140-year history.
The Canadian dollar traded as low as 68.80 U.S. cents in Toronto and end the trading day at 68.81 cents, down almost four-tenths of a cent from Wednesday's close. It ended the day at 69.23 U.S. cents in New York trading, or $1 for 1.4445 Canadian dollars.
The dollar was worth nearly 75 cents a year ago and more than 90 cents in the 1970s. Its previous low was 69.13 cents, or $1 for 1.4465 Canadian dollars, in 1986.
Economists blamed the tailspin on two factors -- a drop in commodity prices because of the Asian economic turmoil and the reluctance of the Bank of Canada to hike interest rates in defense of its currency. Canada also is fighting the effects of a devastating ice storm in Quebec and Ontario.
Meanwhile, international investors have been shifting capital from Canada to the United States to capture the higher interest rates south of the border.
The Canadian currency's fall means higher prices in Canada for U.S. imports and a headache for Canadians visiting the United States. But some economists say there is no cause for alarm.
"It' not the end of the world; it's not because Canada has done anything wrong," said John McCallum, chief economist of Royal Bank. "We should just live with this low dollar and the market will eventually push it back up."
He said Canada's economy is in good shape overall, with low inflation and a government budget surplus for the first time in many years. He said the lower dollar would help Canadian exporters, making their products cheaper in the United States and elsewhere.
The dollar dropped to a historic low after Bernard Bonin, the Bank of Canada's senior deputy governor, hinted Wednesday that interest rates may head lower -- not higher as market watchers hoped -- because of turmoil in Asian markets.
The Canadian dollar was established in 1858, replacing pounds, shillings and pence as a unit of exchange even though Canada would not formally became independent from Britain for nine more years. For most of its history, the dollar has been worth more than 90 U.S. cents and on occasion has risen above par with the U.S. dollar.
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