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A loonie's thickness is measured after being pressed (John Woods/John Woods/The Globe and Mail)
A loonie's thickness is measured after being pressed (John Woods/John Woods/The Globe and Mail)

Loonie weakens as traders seek safety in greenback Add to ...

The Canadian dollar lost 0.37 of a cent to 96.47 cents (U.S.) Thursday as traders increasingly looked to the U.S. dollar as a safe haven against the risk inherent in an unstable global economy.

The dollar has been steadily weakening, closing below parity with the U.S. dollar on Sept. 21, the first time since late January.

The Bank of Montreal said Wednesday the currency will likely slip to as low as 93 cents by the end of the year. The bank says the global economic slowdown is expected to weigh on commodity prices, which have supported the loonie.

The loonie had risen slightly earlier in the day, when the U.S. dollar weakened on relief that German lawmakers voted in favour of a strengthened bailout fund to help European countries stuck in debt crises.

Traders had been encouraged by news that the U.S. economy actually grew slightly more than previously thought during the second quarter. Gross domestic product grew by an annualized rate of 1.3 per cent, up from a previous estimate of one per cent. Also, U.S. claims for jobless insurance dropped 37,000 last week to 391,000.

Meanwhile, there were signs of slightly improving consumer confidence in Canada. The Conference Board of Canada said its index of consumer confidence rose 0.3 of a point in September to 75, narrowly avoiding a fifth consecutive monthly decline as Canadians began to worry more about the prospects for job growth in the country.

The German lawmakers were voting on European leaders' decision in July to increase the effective lending capacity of the so-called European Financial Stability Facility, or EFSF fund to €440-billion. It would also give it new powers, such as buying the bonds of shaky countries or lending money to governments before they get into a full-blown crisis.

The European debt crisis has weighed heavily on markets recently due to fears that Greece is on the brink of a default, which would send shock waves through the global economy, particularly in Europe, and wreak havoc on the continent's banking sector.

Oil prices headed higher with the November crude contract on the New York Mercantile Exchange up 93 cents to $82.14 a barrel.

Metal prices were weak as the December bullion contract rose 80 cents to $1,621.60 while December copper was unchanged at $3.26 a pound after closing Wednesday at its lowest level since August, 2010. Copper is widely considered a proxy for the overall economy.

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