Canadian dollar touches three-year lowOctober 22nd, 2008 - 9:01 am ICT by IANS
Toronto, Oct 22 (IANS) The Canadian dollar touched its three-year low against the US dollar Tuesday, falling as low as 81.91 cents US during the day and closing at 82.15 cents US.It was the first time since August 2005 that the loonie - as the Canadian dollar is called - fell below the 82-cent (US) mark.
The Toronto stock market continued to tumble, losing 455.60 points as prices of commodities and crude - Canada’s main exports - continued to fall.
At closing, the Toronto Stock Exchange (TSX) composite index stood at 9795.8 points, eroding much of the 700-point gain made Monday.
On North America’s third largest stock exchange - where the world’s largest number of oil and gas and mining companies are registered - there was no respite for the energy and financial sectors, both trading lower by about five percent.
Canada’s insurance giant Sun Life Financial Inc., which has reported a $396-m quarterly loss, saw its shares slip down by as much as 13 per cent to close at $29.27.
The Canadian dollar was also pushed down by the Bank of Canada’s decision to cut its interest rates from 2.50 percent to 2.25 percent.
Announcing the decision to spur borrowings, the central bank said the global economy was heading into a “mild recession, led by a US economy already in recession.”
It said, “The outlook for growth and inflation in Canada is now more uncertain than usual. The weaker outlook for global demand will increase the drag on the Canadian economy coming from exports.
“ Lower commodity prices will also dampen the outlook, working through deterioration in Canada’s terms of trade to moderate domestic demand growth.”
The bank said the reduction in interest rate was consistent with the G7 Plan of Action to stabilize their financial systems.
Tuesday’s 25 point cut in interest rate follows the 50 percent cut already announced by the bank last month.
“Canada’s economy and strong financial system will benefit directly from these actions,” the bank said.
Since the heady days of May when the Toronto stock market crossed the historic 15,000-mark for the first time, it has seen investments more than $600 billion wiped off.