The Canadian dollar fell by almost a full cent Wednesday — one day after taking its biggest hit in more than a year — as alarm bells rang in previously obscure corners of the world's credit markets.

The loonie closed at 92.78 cents US, down 0.97 cents from Tuesday's close. It had fallen 1.20 cents US on Tuesday.

The latest upheaval, which relates to money borrowed in Japan, added to woes linked to U.S. junk mortgages and to huge volumes of commercial IOUs based on anything from car loans to credit card payments.

The CBC's Danielle Bochove, reporting from Toronto, said the loonie was hurt by the same thing affecting almost every market in the world. "And that is, in the broadest sense, simply fear," she said.

Amid a growing aversion to risk, "there is an absolutely massive unwinding of something that is called the yen carry trade right now," she said.

"What that means essentially is that investors who borrowed cheap money in Japan to invest in various countries, including Canada, are now reversing that trade. They are selling their Canadian assets, they are selling their loonies, in absolutely massive amounts, and that has caused the loonie to tumble."

As the U.S. mortgage crisis continues, markets are overhung by "the worry that credit will soon become very expensive or even unavailable completely,"  she said.

"This continues to take its toll on stocks. We saw emerging markets being hit very hard overnight. The Nikkei closed down 369 points in Japan. European markets are under severe pressure."

Also negative for the dollar was news on Tuesday that Canada's exports fell for the third straight month in June, narrowing the country's trade surplus with the rest of the world.