Sept. 12 (Bloomberg) -- The Canadian dollar fell against its U.S. counterpart for the first day in five as oil prices continued to slide.

Crude futures are down about 10 percent since reaching a record $70.85 a barrel on Aug. 30. Energy and other commodities account for about 35 percent of Canada's exports. Canadian producers price oil in U.S. dollars and convert the proceeds to the local currency.

``Investors started to focus back on what's happening in commodity markets,'' said George Davis, chief foreign-exchange technical analyst at RBC Capital Markets in Toronto. ``That argued for a price correction in the Canadian dollar.''

Canada's dollar fell to 84.38 U.S. cents at 8:10 a.m. in Toronto, from 84.89 cents on Sept. 9. One U.S. dollar buys C$1.1854. The Canadian currency reached 85.26 cents on Sept. 9, the highest since Nov. 26, after stronger-than-expected job gains boosted speculation the Bank of Canada will raise interest rates further after last week's increase.

Oil and the Canadian dollar have moved in the same direction about 85 percent of the time in the past three months, according to Bloomberg data.

Bank of Canada policy makers raised their target interest rate to 2.75 percent from 2.50 percent on Sept. 7. The bank said the economy is operating close to its capacity and monetary policy is ``still stimulative,'' suggesting more rate increases.

The Bank of Canada's next policy meetings are in October and December. A survey by Bloomberg News on Sept. 1 showed that nine of 12 economists expect the bank to raise the overnight rate by 25 basis points, or 0.25 percentage point, to 3 percent by year- end with three forecasters expecting the rate to end the year at 3.25 percent.

Government bonds fell. The two-year bond yield is at 3.04 percent and the price of the 3 percent bond maturing in June 2007 down 2 cents to C$99.93.

The benchmark 10-year bond yield is 3.83 percent and the price fell 11 cents to C$105.40. Canadian 10-year bonds yield 31 basis points less than comparable U.S. Treasuries and the two- year bond yield gap is 85 basis points.

To contact the reporter on this story: Dawn Desjardins in Toronto at at ddesjardins1@bloomberg.net.

Last Updated: September 12, 2005 08:46 EDT