The Canadian dollar continued its slide Thursday, as yesterday’s selloff in commodities continues and prices take a beating.

The loonie opened at US97.75¢ this morning, down 0.74 of a cent from yesterday’s close. The dollar plunged of 2.19¢ yesterday — the steepest one-day drop since May 1962.

By late morning, crude oil was trading down US$2.68 at US$99.86 a barrel on the New York Mercantile Exchange, while gold was off $US23.80, at US$921.50 an ounce.

“Market inflation break-even rates have fallen noticeably and commodities have stumbled badly this week — gold is lower by almost $90/oz, crude oil has fallen by close to $8/barrel and the CRB index has lost more than 6½%,” wrote Scotia Capital currency strategists Camilla Sutton and Stephen Maylon, in a morning commentary. “Thus it is not surprising to see CAD and AUD perform relatively poorly.”

The BMO Capital Markets Commodity Price Index rose to yet another record high of 211.9, up 5.7% in March, but BMO economists are expecting commodity prices to soften in the coming months. “We expect slower global economic growth will restrain demand for commodities and steer the overall Index moderately lower through 2009, though turbulence in financial markets and the economy will make the journey bouncy,” reads the report, released today.

“The two worst [currency] performers over the past two days have been CAD and AUD – currencies that had not risen to overbought levels against the USD. Nor can we say that a flight to quality is primarily responsible,” added Scotia strategists. “Rather, we think that inflation and commodities hold the key to the current USD rebound. Investors have rushed into commodities as a hedge against inflation and as fears that the Fed was debasing the USD intensified.”

Canadian markets were hard hit by yesterday’s commodity selloff, as the Toronto benchmark index dropped more than 400 points. The TSX regained some of yesterday’s losses in late morning trading today, and was up 11.72 points, or 0.09%.

In New York, the Dow Jones industrial was up 94.11, or 0.78%, at 12,193.77. The S&P 500 was up 9.02 points, or 0.69%, at 1,307.44. And the Nasdaq composite index was up 13.28 points, or 0.60%, at 2,223.24.

Currency strategists at TD Securities are forecasting the loonie’s tumble will continue. “Given that we have essentially traded sideways since December, we should expect the CAD slide to continue for a while at least,” wrote Shaun Osborne chief currency strategist at TD Securities, in a note. “The massive de-leveraging process that appears to be driving at least some of the USD gains at the moment should continue to keep funds underpinned in the near term but we remain longer term CAD bears overall and expect weak domestic growth and lower interest rates to keep the CAD tone generally soft in the medium to long run.”