Canadian dollar falls from highest in almost a month

Canada's dollar fell last week from the highest level in almost a month on concern the global economy may lapse into another recession, dimming the prospects for the nation's exports of raw materials. The loonie, as the currency is also known, has tumbled 5.1 per cent this year, trailing only the greenback as the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency Indexes. Futures trading indicated better-than-even odds the Bank of Canada, which meets on Wednesday, will cut borrowing costs by year-end. "In the next few months there's going to be enough jitters about global growth that the Canadian dollar is likely to see some weakness and spend some time weaker than parity against the US dollar," Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce's CIBC World Markets unit, said by phone from Toronto. The Canadian currency depreciated 0.4 per cent to 98.53 cents per US dollar on Friday, from 98.13 cents on August 26. It rallied four days ago to 97.25 cents, the strongest level since August 4. One Canadian dollar buys $1.0149 (Dh3.73). The currency advanced to a three-year high of 94.07 cents on July 26 before plunging to below parity on August 9. It may slide to C$1.02 by the year-end because of "the deteriorating outlook for the US economy," said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd., by phone from London. Bank of Tokyo had a forecast of 95 cents in August. "It reflects the close links between the US and Canadian economy," Hardman said. Canada sends about three-quarters of its exports to the US, including almost all of its shipments of crude oil, according to research by Royal Bank of Canada's RBC Capital Markets. Contraction Canada's economy shrank at a 0.4 per cent annualised pace in the second quarter following a 3.6 per cent gain in the first three months of the year, Statistics Canada said on Wednesday. It was the first quarterly contraction since the recession two years ago as a strong loonie boosted imports and curbed exports. The nation added 24,000 jobs in August after an increase of 7,100 in the previous month, according to the median forecast of 20 economists before a report from the agency on Friday. The unemployment rate is expected to hold at 7.2 per cent. The loonie dropped on Friday after a US Labour Department report showed employment unexpectedly stagnated in August, with the world's largest economy adding zero jobs and the unemployment rate staying at 9.1 per cent.