Canadian Dollar Plummets Asian Turmoil Blamed For Currency’s Drop To Record Low

Weakened by the Asian flu, the Canadian dollar Thursday fell to the lowest level of its 140-year history.

The Canadian dollar traded as low as 68.85 U.S. cents, down from nearly 75 cents a year ago and more than 90 cents in the 1970s. Its previous low was 69.13 cents, or $1 for 1.4465 Canadian dollars, in 1986. It ended the day at 69.23 U.S. cents in New York trading, or $1 for 1.4445 Canadian dollars.

Meanwhile, the Indonesian currency plunged to an astonishing record low of 16,500 rupiahs against the U.S. dollar - a drop of 85 percent compared with its value of seven months ago when Asia’s financial crisis first erupted.

The rush to sell rupiahs started as soon as trading began Thursday in Jakarta.

“It was like a bomb,” said Chia Woon Khien, an analyst with SE Banken in Singapore.

Economists blamed the Canadian dollar’s tailspin on two factors - a drop in commodity prices because of the Asian economic turmoil and the reluctance of the Bank of Canada to hike interest rates in defense of its currency.

Meanwhile, international investors have been shifting capital from Canada to the United States to capture the higher interest rates south of the border.

The Canadian currency’s fall means higher prices in Canada for U.S. imports and a headache for Canadians visiting the United States.

The dollar dropped to a historic low after Bernard Bonin, the Bank of Canada’s senior deputy governor, hinted Wednesday that interest rates may head lower - not higher as market watchers hoped - because of turmoil in Asian markets.