By Chris Fournier Oct. 27 (Bloomberg) -- Canada's dollar fell to the lowest since September 2004 as its U.S. counterpart strengthened against most of the world's major currencies. The Canadian currency is headed for its worst monthly fall since at least 1950, depreciating 17 percent since Sept. 30, as commodity prices and stocks have declined. Crude oil, which weakened to the lowest since May 2007, accounted for 10 percent of Canada's export revenue in 2007. The U.S. is Canada's largest trading partner. ``Markets are still trading in a risk-averse environment and that seems to bode well for the U.S. dollar,'' said Dustin Reid, director of foreign-exchange strategy at RBS Greenwich Capital Markets Inc. in Chicago. ``The Canadian dollar will probably continue to be offered against the U.S. dollar as long as equities trade softly and commodity prices continue to fall.'' The Canadian dollar depreciated by as much as 1.3 percent to C$1.2942 per U.S. dollar, from C$1.2775 on Oct. 24, the lowest since Sept. 21, 2004. It traded at C$1.2832 at 10:19 a.m. in Toronto. One Canadian dollar buys 77.92 U.S. cents. ``Scaling back of risk is proving more U.S. dollar supportive,'' said Steven Barrow, a currency strategist at Standard Bank Plc in London. ``The Canadian dollar has been dragged down in that environment and hit a little bit more because of things like proximity to the U.S. and what that could imply for its economy.'' Weaken to C$1.30 Reid predicts the loonie, as Canada's currency is known because of the aquatic bird on the one-dollar coin, may weaken to C$1.30 this week. Barrow forecasts it will fall to C$1.30 within six months. The MSCI World Index, a stock index of 23 developed nations, dropped 3.7 percent to 839.25, extending the measure's biggest monthly drop on record. Crude oil for December delivery fell as much as $2.85, or 4.4 percent, to $61.30 a barrel. It reached a record $147.27 on July 11. Copper, gold, nickel, zinc and aluminum also fell. Demand for those commodities from the U.S. and emerging economies such as India and China last year drove the loonie to parity with the U.S. dollar for the first time in three decades. Canada, the world's eighth-biggest economy, is the second-biggest exporter of natural gas and sits on the largest pool of oil reserves outside the Middle East. Canadian exporters will be hobbled by a recession in the U.S., a world economy that ``appears to be heading into a mild recession,'' and lower prices for the country's exported commodities, the Bank of Canada said on Oct. 21. Sell Canada's Currency Investors should sell Canada's currency against the U.S. dollar as declining expectations for global growth push down prices for commodities the nation exports, RBC Capital Markets Inc. said. ``The somber global economic outlook which is adversely affecting commodity prices,'' supports additional U.S. dollar gains, wrote Toronto-based Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc., in a research note. Investors should buy the U.S. dollar targeting an initial advance to C$1.30, wrote Strauss. They should exit the trade if the greenback slips to C$1.2409. The Canadian dollar rose against the commodity-based currencies of other countries, climbing 1.2 percent versus New Zealand's dollar, 1.3 percent against Australia's dollar and 0.6 percent against Norway's krone. The 10-year note's yield fell 2 basis points, or 0.02 percentage point, to 3.61 percent. The price of the 4.25 percent security maturing in June 2018 added 18 cents to C$105.15. The yield on the two-year government bond dropped 1 basis point to 2.08 percent. The price of the 2.75 percent security due in December 2010 added 3 cents to C$101.37. The 10-year bond yielded 153 basis points more than the two- year security, down from 158 basis points on Oct. 10, when the so-called yield curve was the steepest since September 2004. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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