Source: The Canadian Press

The loonie has been living up to its name in recent weeks, swooping crazily from just above parity with the U.S. greenback to well below as it navigates a violently turbulent global economy.

The Canadian dollar’s latest move was a 2.12-cent retreat Thursday, taking it down to 93.65 cents US, as panicky currency traders looked for somewhere safe to park their cash while volatility rocks the world’s markets.

It had fallen as much as 2 1/2 cents during intraday trading to 93.27 cents US.

The biggest concern for weeks has been the threat of economic instability in Europe, with the possibility that Greece might default on its debts. Even if it doesn’t — thanks in part to a $1-trillion European Union rescue package — similar troubles in other member countries could still stall the global economic recovery.

Despite the relatively robust health of the domestic economy, the loonie has now fallen nearly four cents in little more than a week and nearly seven cents since late April, when it hovered around parity with the U.S. dollar.

“Canada is as unaffected as a country can be but that’s not to say it’s completely unaffected, because ultimately as we learned in the credit crunch if things were to get really quite bad, you do see every country in the world sucked into this thing,” said Eric Lascelles, chief strategist at TD Securities.

“It’s not a statement whatsoever against Canada, against the Canadian economy or against the currency directly — it really is a natural consequence of crisis which generally results in a flight to safe-haven currencies and, rightly or wrongly, the U.S. dollar is that currency right now.”

While the loonie appears to be taking it on the chin, that doesn’t mean it won’t bounce right back up to parity when the hurricane of uncertainty dies down and traders climb out of their risk-aversion bunkers, Scotia Capital currency strategist Camilla Sutton wrote in a note to clients.

“Though we continue to believe that the medium-term outlook for the U.S.-Canadian dollar is intact for another run at parity, until risk aversion abates (the U.S. dollar) is vulnerable to a push higher” against the loonie, Sutton wrote.

While that shouldn’t have much impact on the Bank of Canada’s plans to raise interest rates, “we think the market is still highly sensitive to the Bank of Canada decision on June 1,” she added. That makes it a little less likely — somewhere around a 50-50 chance — that the central bank will raise rates from their rock-bottom 0.25% on June 1, waiting instead to do so in July.

A lower loonie is generally not good news for many ordinary Canadians, as the price they pay for vacations in the U.S. and goods purchased there increase — including many of the items that make their way onto store shelves.

It also tends to suck the wind out of stock markets here, as a rising U.S. dollar generally sees a corresponding drop in the price of oil and gas, a commodity that has enormous influence on the main board of the Toronto Stock Exchange.

But for Canadian industry a dropping loonie can be a good thing, lowering the price of goods destined to go south of the border to the country’s largest market and increasing demand.

That means everything from newsprint and lumber to auto parts and chemicals shipped to the United States are cheaper for American consumers, which means more Canadian products are sold in the American market, boosting jobs in Canada’s export industries.