Financial Update

U.S. gas prices hit new record of $3.25/gallon as oil jumps to $110 as U.S. dollar falls to a new low
Canadian dollar gains on record high oil prices

· TSX -47.18
· Dow -46.57
TORONTO (Reuters) - The Canadian dollar rode record oil prices to a higher close against a besieged U.S. dollar
· Dollar +.32c to remain just above par at $100.99US
In part, the US dollar is falling in anticipation of another interest rate cut by the Federal Reserve next week. Lower rates tend to weaken the dollar.
U.S. crude prices climbed to a record $110.20 a barrel, giving support to the commodity-linked Canadian dollar.
· Oil after topping $110US per barrel closed just below +.$1.17 to $109.92US per barrel
· Gold +4.60 to $978.800US per ounce
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
The record high oil prices were also partly responsible for the higher bond prices, said Max Clarke, an economist at IDEAglobal in New York."For the most part, it (oil) does provide general sluggishness in the American economy and that puts upward pressure on bonds."


Bank of Canada sees more subprime losses globally
Wed Mar 12, 6:25 PM
OTTAWA (Reuters) - The Bank of Canada said on Wednesday the U.S. housing turmoil is not over yet and that it expects more writedowns on subprime-related debt by banks worldwide.
In testimony to a Senate banking committee, Bank of Canada Senior Deputy Governor Paul Jenkins said Canadian financial markets were facing "less intense" liquidity pressures than in the United States and elsewhere.
"One of the issues the financial system globally is still grappling with is indeed this issue of the size of losses -- writedowns -- that will have to be taken," Jenkins said in response to a question from a Senator.
"And then you get into the issue of the need for recapitalization of these institutions, and so from that global perspective, I would say that there probably will indeed be some further writedowns."
Jenkins declined to comment on possible losses by Canadian financial institutions.
He said coordinated action by the U.S. Federal Reserve, the Bank of Canada and three other central banks, announced on Tuesday, aimed at ensuring access to hundreds of billions worth of central bank cash by financial institutions facing funding shortages.
Canada's central bank offered 28-day lending rather than the overnight loans it usually provides.
"With that, we're trying to address what we call liquidity pressures in certain funding markets that we're seeing further out the yield curve than just overnight," Jenkins said.
"These funding pressures, these liquidity pressures, have been more intense in the United States than here in Canada."
The key lesson taken from the global credit woes is the need for greater transparency in structured credit products, allowing investors to value them properly, Jenkins said.
The Bank of Canada is taking concrete steps toward promoting more transparency by laying out proposed criteria for accepting asset-backed commercial paper as collateral for its lending facilities, he said.
In addition to demanding that the ABCP it accepts be of high quality, it is also pushing for more disclosure on the assets underlying the product.
It has asked for feedback from primary dealers and plans to announce the terms for accepting ABCP as collateral by the end of March.
"We are trying through this exercise to encourage more standardized transparent documentation of these products," Jenkins said.
Jenkins, who was joined by Deputy Governor John Murray, did not comment on the outlook for monetary policy or the Canadian economy in an appearance that focused on internal barriers to trade within Canada.
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