Oct. 10 (Bloomberg) -- Canada's dollar suffered the biggest weekly and daily declines in at least 37 years as the deepening credit crisis drove investors to take refuge in the U.S. dollar.

The Canadian currency declined 10 percent against its U.S. counterpart since Oct. 3, the biggest weekly loss since January 1971, when Bloomberg records begin. It touched the lowest since August 2005 today, as prices for commodities including crude oil plummeted and global stock markets plunged.

``The Canadian dollar has become the whipping boy,'' said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. ``This is still part of the bigger picture of demand for U.S. dollars.''

The Canadian dollar dropped as much as 5.4 percent today to C$1.2125 per U.S. dollar, from C$1.1501 yesterday, the weakest since Aug. 22, 2005. The currency fell for a seventh day, its longest losing streak since the period ended Aug. 11. It last traded at C$1.2031 at 2:49 p.m. in Toronto. One Canadian dollar buys 83.12 U.S. cents.

Canada's Finance Minister Jim Flaherty joined his colleagues and central bankers from the Group of Seven countries for discussions in Washington on ways to ease the crisis.

Crude oil for November delivery fell as much as $9.50, or 11 percent, to $77.09 a barrel on the New York Mercantile Exchange. It closed at $93.88 a week ago and reached a record $147.27 on July 11.

The Canadian currency briefly pared its loss today after a government report showed the nation recorded its biggest one- month employment gain in at least 30 years during September.

`Not Normal'

``In normal times, a huge job gain would have meant an equally huge rally in the Canadian dollar,'' said Avery Shenfeld, senior economist at CIBC World Markets Inc. in Toronto. ``These are not normal times. Instead, the financial system is generating a rush to U.S. dollars that is swamping any good news about Canada.''

Canada added 106,900 jobs last month after a gain of 15,200 positions in August, Statistics Canada said today in Ottawa. The median forecast of 20 economists surveyed by Bloomberg News was for an increase of 10,000 in September. Canada's unemployment rate held at 6.1 percent.

``Data isn't driving the currency these days,'' said Shane Enright, currency strategist at CIBC World Markets Inc. in Toronto. ``Oil is lower because credit spreads continue to widen and equity markets continue to plunge. Oil and the Canadian dollar moves are the secondary effects of these factors.''

The Standard & Poor's/TSX Composite Index dropped 18 percent this week.

Another Weekly Decline

The Bank of Canada joined the Federal Reserve, the European Central Bank and other global counterparts on Oct. 8 in reducing interest rates to ease the financial crisis. The Canadian target lending rate was cut to 2.5 percent from 3 percent. The Bank of Canada next meets Oct. 21.

Canada's dollar weakened 14 percent since Sept. 26 as turmoil in global financial markets prompted investors to seek the relative safety of U.S. government debt. The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, slumped 4.5 percent last week.

``We are still heading into a very challenging macro- economic environment for the Canadian dollar,'' said David Watt, a senior currency strategist at RBC Capital Markets in Toronto, a unit of Canada's biggest bank by assets. ``The outlook has not changed. The Canadian dollar can't escape the macro background, but it can avoid the worst of the fear and panic-driven mania.''

Other commodity-based currencies, including those in Brazil, Australia and New Zealand, declined versus the Canadian dollar this week. The real lost 1.8 percent, the kiwi is down 0.3 percent and the Aussie has dropped 8.6 percent in the period.

`Increasingly Cautious'

Raw materials account for 60 percent of Australia's exports and 70 percent of New Zealand's.

Canada relies on commodities for about half its export revenue. Crude accounts for 21 percent of the weighting in the Bank of Canada Commodity Price Index, the largest single component. The Index fell 6.8 percent this week, the biggest drop since October 2005.

``As commodity prices continue to fall and political uncertainty rises we have become increasingly cautious on the Canadian dollar,'' wrote Shyam Devani, Todd Elmer, Tom Fitzpatrick, Michael Hart and Mike Rosborough at Citigroup Global Markets Inc.

Canada will hold a federal election on Oct. 14. Canadian Prime Minister Stephen Harper's Conservative Party has lost ground in the polls to the opposition Liberal Party.

The yield on the two-year government bond slipped 31 basis points, or 0.31 percentage point, to 2.22 percent this week. The price of the 2.75 percent security due in December 2010 climbed 62 cents during the period to C$101.10.

The 10-year note's yield increased 20 basis points to 3.79 percent during the week. The price of the 4.25 percent security maturing in June 2018 fell C$1.70 to C$103.69.

The 10-year bond yielded 157 basis points more than the two- year security, up from 106 basis points a week ago. The so-called yield curve is the steepest since September 2004.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Last Updated: October 10, 2008 14:51 EDT