Loonie Has Worst Year Since 1860s

(John Morrisy — The Gazette)

The Canadian dollar in 2008 delivered its worst loss in modern times, falling from near parity to 82.10 cents US on Wednesday, and will slide further toward 72 cents US as the global recession and financial crisis play out, Scotia Capital predicts.

Not since the 1860s has the loonie performed so poorly, an 18.5 per cent retreat, spurred by plunging commodity prices and a U.S. dollar bid up by investors seeking safe haven amid the credit crisis.

“In isolation, the dollar’s decline is quite noteworthy, but in proper context it is less remarkable,” said Steve Malyon, currency strategist at Scotia Capital.

“We’ve had an exceptionally strong move in the U.S. dollar this year, which — despite its recent weakness — is still up at least 18 per cent, if not more, against more than half of the G10 currencies.

“On a relative scale, the Canadian dollar doesn’t look that bad. It’s actually outperformed several other currencies,” particularly the other G10 commodity currencies, the Australian and New Zealand dollars.

As well, the decline of 2008 was preceded by a 14 per cent surge in 2007, during which the loonie hit its Nov. 7 all-time high of $1.1030 US, as markets fretted over U.S. economic weakness and the likelihood of rate cuts ahead. Read more here.