The Canadian dollar fell versus the US dollar on Tuesday as the greenback rallied against a range of currencies as investors sought safety amid growing worries over the global economy. The Canadian currency finished at C$1.2676 to the US dollar, or 78.89 US cents, down from C$1.2547 to the US dollar, or 79.70 US cents, on Monday.
"We're seeing flight to safety to the US dollar and that's driving all currencies down against the greenback, including our own," said Sal Guatieri, senior economist at BMO Capital Markets. Economic concerns may be leading investors to think things will get worse before they get better, said Guatieri, noting: "Clearly, that's on full display today with equity markets taking another beating."
Earlier in the session, the Canadian currency firmed after the Bank of Canada cut its key overnight lending rate by 50 basis points to a 50-year low of 1.0 percent. "The currency rallied briefly because the actual size of the move was less than the market was generally pricing in," said Guatieri. But as the session wore on "the market just realised that the bank still has the door open for further rate cuts and that's likely what we will see in March so it took the currency lower," he added.