Canadian Loonie touches 12-month low

The Canadian dollar fell below 96 cents US and touched a 12-month low Friday, as traders moved into more widely traded U.S. dollar denominated securities.

The loonie was trading at 96.32 cents US, down 0.15 of a cent, by midday. Earlier, it dropped as much as 0.93 of a cent to 95.54 cents US. It hasn't been that low since Sept. 8, 2010.

It has lost 1.35 cents this week.

Markets are concerned that a slowing global economy will hurt exporting countries such as Canada.

The drop came even as Statistics Canada reported the economy registered a modest gain in July, with gross domestic product rising 0.3 per cent, which met economists' expectations.

The GDP rise followed a 0.2 per cent increase in June and translated into annualized growth of 2.3 per cent.

The U.S. dollar strengthened amid another round of doubt that European officials can find a solution to the government debt crisis.

Canada’s dollar has also fallen against other major currencies.

In two months, the loonie has fallen by 6.8 per cent against the Bank of Canada’s index of six currencies used by the country’s biggest trading partners.

"It is impossible to ignore the accelerating weakness in theCanadian dollar; our base case remains that as long as risk aversion remains high, it is likely that the Canadian dollar will struggle,"Camilla Sutton, chief currency strategist at Scotia Capital, wrote in a report.

"In order for risk aversion to drop significantly, markets will need a better solution for Europe (one that includes a framework for an orderly default for Greece, bank recapitalization and a plan to ring-fence contagion)," Sutton said.

"We expect this before year end and accordingly, believe we will see the Canadian dollar retrace some of its losses into year end; however, for now the near-term outlook continues to darken."

On Wednesday, the Bank of Montreal predicted Canada’s currency will fall to 93 cents over the next three months amid slowing global growth, the increasing market nervousness over Europe’s debt crisis and as commodity prices continue to decline.