Canadian dollar drops over 2 cents to 84.69 cents U.S.

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THE CANADIAN PRESS

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TORONTO - The once-hot loonie was colder than a frozen turkey yesterday, as many Canadians were preparing for the Thanksgiving holiday.

Canada's currency spent much of the day down more than three cents against the American dollar and at one point it was down much as 4.87 cents U.S. -- the biggest one-day decline on record.

But within minutes of hitting the intraday low late in the afternoon, the loonie began to revive and ended yesterday at 84.69 cents US -- down 2.59 cents -- still one of the biggest one-day drops.

In the first 10 days of October, Canadian dollar has lost more than nine cents from the end of September, when the loonie closed at just below 94 cents U.S.

Friday's close was the lowest since Feb. 8, 2007.

Whether the dollar's fall against the U.S. greenback is a good or bad thing may depend on where you stand or what you do for a living. But with so many rapid changes in the dollar's value recently, many observers said they're waiting to see what happens next.

Although a lower Canadian dollar may make trips and vacations in the United States more expensive, Lesley Paull, owner of Paull Travel in Edmonton, said it continued to be busy on Friday as people prepared to fly to sun destinations in November.

"I suppose that could change," Paull said. "I know it's everybody's mind because you can't turn on a radio or read a paper or turn a television on without hearing about it."

But she said people in Edmonton really count on getting away for a vacation away from the long winter, and many bought homes in the United States while the Canadian and U.S. dollars were at par.

"We've been through lots of crises in my years. Everybody still travels, it seems," Paull said. "But, honestly, it's just so hard to know at this point. Maybe another week or two might give us a better idea.

A spokesman for Sears Canada, one of the country's biggest retailers, said store prices don't necessarily rise and fall in sync with the exchange rate because there are other factors involved. A bigger issue right now, said Vincent Power, is the general state of the economy.

"We have sales every week and we're reviewing those very closely and even lowering some of our promotional prices . . . to be able to stimulate some sales, because consumer confidence is relatively low now compared to its position over the last five years."

The loonie has now lost more than one-quarter of its value since hitting a peak of 110.3 cents US last November on the strength of a three-month rise that began in the summer of 2007.

According to the Bank of Canada's exchange rate website, the dollar hasn't fallen more than 3.38 cents U.S. in one day in modern history. That occurred June 21, 1961.

The dramatic fall of the loonie this month reflects the impact of lower commodity prices, especially oil, along with weak economies around the world and concern that even Canada's sturdy banks are being effected by a global credit crunch. The loonie is also being sideswiped by rising demand for the U.S. dollar as the United States government tries to borrow heavily in global money markets to finance its US$700-billion bailout of banks.

Ironically, the greenback is currently in huge demand because of the U.S. troubles and global economic uncertainty. Fund managers from around the world are buying up U.S. Treasury bills -- historically considered one of the most conservative investments -- and need American currency to do so.