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Loonie not ready to fly over fiscal cliff

The Canadian dollar was stuck below parity with the U.S. dollar Friday on worries about the fallout from a string of tax hikes and deep spending cuts set to automatically go into effect in the U.S. at the end of the year.

The loonie fell 0.12 of a cent to 99.84 cents US as worries about the knock-on effects from those hikes and cuts sent traders to the perceived safe haven of U.S. Treasuries.

Unless Democrats and Republicans can come together and arrange a deficit-cutting compromise, tax increases and spending cuts totaling US$600 billion will automatically come into effect, a so-called "fiscal cliff" that would likely tip the U.S. back into recession and drag down other economies with it, including Canada's.

Bank of Canada governor Mark Carney said Thursday that the fiscal cliff is the most imminent threat facing the Canadian economy.

Commodity prices were mixed amid worries about demand concerns and the higher greenback.

The December crude contract on the New York Mercantile Exchange shook off early losses after encouraging U.S. consumer data was released mid-morning, rising 60 cents to US$85.69 a barrel.

The Canadian Press

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