Loonie loses more than 1 cent

The Canadian dollar tumbled more than one cent against the U.S. dollar after trading down by two cents earlier in the day.

While the loonie sank, North American stock indices were hit with triple-digit losses.

Nervous investors appeared to seek safety in the U.S. dollar and in gold after a G7 finance ministers meeting over the weekend that did not produce much in the way of new economic strategies to deal with the world economic downturn.

The Canadian dollar closed down 1.27 cents at 79.13 cents US. It was the loonie's lowest close since Jan. 20.

The U.S. dollar traded higher against the euro and the British pound, while gold jumped $25.50 to close at $967 US an ounce.

The Canadian dollar's fall also coincided with a sharp drop in the price of oil. On the New York Mercantile Exchange, light sweet crude oil for March delivery ended down $2.58 at $34.93 US a barrel.

The Canadian dollar is often viewed as a "petrodollar," meaning its fortunes are closely tied to the prospects for oil.

Investors bailed out of stocks as they continued to fret over the economy and prospects for the North American auto sector.

The S&P/TSX composite index finished down 299.40 points, a loss of 3.5 per cent, at 8,378.70. The energy sub-index lost five per cent, while the financial services index shed more than six per cent.

On Wall Street, the Dow Jones industrial average lost 3.8 per cent, closing at 7.552.60.