Dollar falls nearly a cent

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The loonie's flight toward parity with the U.S. dollar hit a headwind late last week, and its descent continued today after losing almost a cent.

After peaking at the recent high of $0.9835 (U.S.) last Thursday, the loonie now hovers about 2 cents lower. That's still an improvement from the $0.94 levels witnessed a month ago, but it's a sharp reversal from the rapid appreciation that started in mid-July.

"There's been a very large shift in market psychology," said Camilla Sutton, foreign exchange strategist at Scotia Capital. Last week the market expected the Federal Reserve to make negative comments about the U.S. dollar in a scheduled statement this afternoon. However, traders have changed their tune and are now buying the greenback on expectations that they were initially too negative.

Ms. Sutton also noted that weaker than expected Chinese import data released earlier today hurt the loonie. "There are some signs of moderation in the Chinese domestic economy," she said, and that affects commodity currencies like the Canadian dollar.