Financial Update

Loonie's down but not out, say economists

· TSX +66.26 pts

· Dow +261.66

The Canadian dollar sunk to its lowest level in two months ahead of the Easter long weekend, settling firmly below par as commodity prices came off the boil

· Dollar -.78c to $ $97.71US

Oil prices closed Thursday down 9% from Monday's record high of US$111.80 a barrel

· Oil -.70c to close at $101.84 US per barrel

.Gold, which is commonly used as a hedge against the US dollar, tumbled as the greenback rose, ending the week low after hitting a record high of US $1033.90 Monday

· Gold -$25.10 to $919.60

· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

Alia McMullen, Financial Post Published: Thursday, March 20, 2008

.Analysts say lower commodity prices over the course of 2008 will place downward pressure on the loonie amid concerns U.S. demand will fall as its economy weakens. But the past week's decline in the Canadian dollar is unlikely to continue, with the currency expected to linger near parity for at least another three months.

The loonie closed at US97.71 cents on Thursday. It was the currency's lowest close since Jan. 23, when it ended at US97.69 cents.

Douglas Porter, deputy chief economist at BMO Capital Markets said traders sold the commodities-driven loonie on the back of a shock decline in commodity prices, particularly oil and gold.

"It's a bit of a dangerous game these days," he said. "I doubt many people were looking for an 8% to 9% slide in commodity prices at the start of the week, and we have seen if anything, increasing volatility in a number of markets recently."

With traders away Friday for the Easter holiday weekend,. "We do think that the slowdown in the U.S. and the broader global economy will undermine commodity prices somewhat in the months ahead," Mr. Porter said.

However, he did not expect the loonie to continue to trend lower, with Canadian retail sales figures, due this Friday, expected to be strong, compared with a forecast for more weak U.S. housing data.

"Effectively we've seen the currency as swinging back and forth around parity since late last year and I'm not convinced we've broken out of that channel just yet," he said. "Through the second half of the year I think we might see a little more sustained softening in the currency and through 2009 when slower growth really starts to bite down on commodity prices."

Darren Richardson, corporate dealer at foreign exchange firm Canadian Forex said the U.S. dollar has had an upper edge since the U.S. Federal Reserve announced new measures to add liquidity to the credit system on Sunday, followed by a 75-basis point interest rate cut on Tuesday, which took U.S. rates down to 2.25%.

"Those definitely gave confidence back to the markets and opened an opportunity for the U.S. dollar. Commodity prices were the final trigger to help the U.S. dollar come back," Mr. Richardson said.

Despite the loonie's dive in recent days, he said the Canadian dollar would remain relatively strong.

"It's still in a very dominant position compared to the last 12 months," he said.

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