By Chris Fournier Oct. 3 (Bloomberg) -- Canada's currency posted the biggest weekly slump since at least 1971 as commodity prices plummet in the wake of the global financial crisis and investors buy U.S. dollars. The Canadian dollar plunged 4.4 percent against its U.S. counterpart since Sept. 26, the biggest weekly loss since January 1971, when Bloomberg records begin. An index measuring commodities fell by the most in more than 50 years. ``There's been a lot of selling of resource sectors, and the commodity currencies are taking it on the chin,'' said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. ``It looks more and more like the entire global economy is going to slow down.'' Canada's dollar fell as much as 0.5 percent today to C$1.0844 per U.S. dollar, the weakest since Aug. 16, 2007, from C$1.0791 yesterday and C$1.0336 a week ago. It last traded at C$1.0810 at 3:44 p.m. in Toronto. One Canadian dollar buys 92.50 U.S. cents. Crude oil for November delivery fell 12 percent this week to $93.55 a barrel. It has retreated from its record of $147.27 on July 11. The Canadian currency has weakened 6.6 percent since then. Canada relies on commodities for about half of its export revenue. The U.S. is Canada's largest trading partner. The Reuters/Jefferies CRB Index that tracks 19 commodities including gold, crude oil and sugar, fell 10.4 percent this week, the most since at least 1956. `Tougher and Tougher' ``This is all a function of the credit crisis,'' said Gencher, who predicts the Canadian dollar will trade at C$1.0750 to C$1.0830 by year-end. ``Funding the balance sheets is getting tougher and tougher. Everyone needs U.S. dollars. That's why the U.S. dollar is better bid.'' After surging 17 percent in 2007 as commodity prices soared, the Canadian dollar weakened 7.7 percent so far this year as the U.S. economy cooled and oil prices fell. Crude accounts for 21 percent of the weighting in the Bank of Canada Commodity Price Index, the largest single component. ``The support from commodities is definitely gone and will continue to hinder the Canadian dollar,'' said Steven Barrow, a currency strategist at Standard Bank Plc in London. The currency will slip against the U.S. dollar, ``but it won't slip as much as many other currencies.'' Australia and Brazil The Australian dollar and Brazilian real are the worst performers this week among the 16 most-active currencies. Against Canada's currency, they lost 2.5 percent and 5.6 percent this week. Raw materials such as gold account for 60 percent of Australia's exports. Brazil is the world's biggest sugar producer and exporter. Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.13 against the U.S. dollar by the end of 2009, according to the median forecast in a Bloomberg News survey of economists. Barrow forecasts the currency will fall to C$1.20 in 12 months. ``The weakened outlook for global economic growth has triggered a large-scale price correction in commodity markets,'' George Davis, chief technical analyst at RBC Capital Markets in Toronto, wrote in a note to clients. ``The plunge in oil, base metals and global equity markets is a negative development for the Canadian dollar.'' Davis predicts the Canadian dollar will weaken further against the U.S. currency. The yield on the two-year government bond fell 30 basis points, or 0.30 percentage point, this week to 2.52 percent. The price of the 2.75 percent security due in December 2010 rose 61 cents to C$100.47. Canadian government bonds have returned 4.5 percent this year, according to Merrill Lynch & Co. index statistics. U.S. Treasuries have returned 5.8 percent in the same period. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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