The loonie closed at just under 106 cents US Wednesday, as crude oil and commodity prices fell amid concerns over Washington's ongoing debt woes.
The Canadian dollar was down 0.68 of a cent to 105.39 cents US by the end of Wednesday's trading.
On Tuesday the loonie hit 106.31, its highest point since the first week of November 2007 when it briefly topped $1.08 against the greenback, BNN's Michael Kane said.
The U.S. dollar gained ground against the loonie in late trading, even as Washington faces down an Aug. 2 deadline to reach a deal to increase its debt ceiling.
If legislators don't agree to extend the U.S. debt ceiling by next week's deadline, the U.S. will likely begin to default on its debts and could lose its top credit rating.
The ongoing debt talks are taking their toll on the markets, Kane said.
"When it comes to investors and financial markets they hate uncertainty. It's a cliché but it's true. That's why we're seeing equities really starting to drop now," he told Â鶹´«Ã½ Channel.
In Toronto the S&P/TSX composite index dropped 267.89 points to 13,032.67. New York's Dow industrials also fell Wednesday, as did the Nasdaq and the S&P500 index.
Gold bullion, which has reached new heights amid the U.S. economic uncertainty, declined $1.70 Wednesday from its latest record close of US$1,615 an ounce. The precious metal is typically seen as a safe-haven investment during tenuous financial times.
Oil prices fell Wednesday to below US$99 a barrel. The slip happened after estimates showed U.S. crude supplies jumped by four million barrels last week, suggesting demand could be weakening.
Expectations had been that the crude supply would drop by 2.3 million barrels, rather than increase.
Copper prices also fell Wednesday after gaining seven cents a day earlier.
Capital Markets issued an investor note on Wednesday, looking at the effects of the ongoing uncertainty related to the U.S. debt crisis.
The note said "the prices of gold and silver are obvious beneficiaries of the increasing worries about U.S. government," but added that other commodities have also held up better than expected.
"Nonetheless, with the exception of precious metals, we still think that commodity prices will fall sharply in the event of an actual U.S. downgrade or default," the note said.
With files from The Canadian Press
