The Canadian dollar retreated sharply in currency trading Monday following comments by Bank of Canada governor David Dodge on its recent rapid appreciation.

Rodrigo de Rato, left, managing director of the International Monetary Fund, and Bank of Canada governor David Dodge chat in Washington on Friday.
(Gerald Herbert/Associated Press)

The loonie finished down 1.55 cents in trading on currency markets to hit $1.02 US.

Over the weekend, Bank of Canada governor David Dodge told a group of bankers at an International Monetary Fund meeting that the loonie's recent rise was "abnormally quick and doesn't seem to be related to the domestic factors which would normally lead to that sort of appreciation."

Until Sunday, the central bank had held off sounding warnings over the loonie's rise, which has seen it climb more than 20 per cent against the U.S. dollar this year to levels not seen since mid-1976.

The U.S. dollar was also staging a bit of a rebound after hitting a fresh record low against the euro.

Also weighing on the Canadian dollar was a selloff in oil. On the New York Mercantile Exchange, the price of oil for November delivery fell $1.04 to settle at $87.56 US a barrel.

One analyst said risk-averse investors were moving out of currencies that are closely tied to economies perceived as resource-based, such as Canada's and Australia's.

On Saturday,  Spain's Rodrigo de Rato, managing director of the IMF, said he was optimistic about the world economy, despite the recent concerns about the credit market.

"The global economy is expanding from a solid foundation," he said.

With files from the Canadian Press