The soaring Canadian dollar ended a volatile day of trading 1.55 cents down, after the Bank of Canada's governor David Dodge said over the weekend the currency's recent surge was "abnormally quick."

The dollar closed at US$1.02 on Monday, following a Friday close of US$1.0355. At one point, it had plunged as much as 1.77 US cents.

The dollar has gained 21 per cent of its value since the beginning of 2007, with most of the movement occurring since August.

Dodge told an audience of international bankers in Washington on Sunday that "the recent round of appreciation has been abnormally quick and doesn't seem to be related to the domestic factors, which would normally lead to that sort of appreciation.''

BNN's Michael Kane said Dodge was jawboning with his comments.

"It's just a little bit of talk that will take some of the steam out of the marketplace," Kane said Monday.

Meanwhile, Finance Minister Jim Flaherty will meet the Retail Council of Canada and representatives from individual retailers, such as Wal-Mart Canada and Hudson's Bay Co., in Ottawa on Tuesday.

He told CTV's Question Period on Sunday that he will pressure them to lower prices despite the advantages of a high dollar.

Diane Brisebois, president and CEO of the Retail Council of Canada, rebuked claims that retailers are keeping prices up to make more money.

She said in a statement to retailers that she will use the meeting with Flaherty to ensure the retail industry "is not used as a political pawn."

"The reality is that in most cases, retailers have not been able to reduce their prices because their merchandise costs have not declined," Brisebois said in a statement last week. "Canadian manufacturers, importers and wholesalers, in most cases, have retained the benefits of the appreciation of the dollar and have not passed the savings on to retailers and their customers."

She said the Retail Council of Canada also requested meetings with the Canadian Manufacturers & Exporters and Canadian Importers Association to demand that they acknowledge their role in the prices that customers pay.

Flaherty also told CTV's Question Period that the weakened U.S. dollar and credit crunch in the housing sector has sparked North American recession fears and forced Canada to support its neighbour to the south.

"Canada has borne a disproportionate burden in terms of the depreciation of the U.S. dollar. We've suffered a third of that burden with the European community, but we're only 33 million people and they are 300 million people or more," Flaherty said.

Meanwhile, Matthew Strauss, senior currency strategist at RBC Capital Markets, said factors such as investor uncertainty are influencing the decline of the dollar.

"We have seen not only the Canadian dollar but a number of other currencies, including the Australian dollar and the New Zealand dollar, under pressure," Strauss told The Canadian Press.

"And as we've seen in the past, with increased risk aversion, investors tend to sell cyclical currencies, or so-called commodity-based currencies, which includes the Canadian dollar."

Last Thursday, the Bank of Canada said that the country's economy has already begun to cool and would run out of steam by the end of the year.

''Although Canada's economic growth in the first half of 2007 was somewhat stronger than earlier projected, the projection for the second half of this year and for the first half of 2008 is somewhat weaker,'' the bank said.

''This reflects the downward revision to the growth projections in the U.S. gross domestic product, as well as the effect of the higher assumed level of the Canadian dollar.''

However, the central bank did predict that the economy would make a soft landing.

The bank said it expected the loonie to remain high and forecasted that it would hover at about 98 cents US for the next two years.

On the stock markets Monday, Toronto's S&P/TSX composite index rebounded from a loss of 100 points to close 41.94 points higher at 14,043.36.

On Wall Street, the Dow Jones industrials also rebounded from a triple-digit loss to close up 44.95 points at 13,566.97 after last week's sell off cut more than four per cent from the blue chip index.

The Nasdaq composite index was also positive, up 28.77 points to 2,753.93 and the S&P 500 index eased up 5.7 points to 1,506.33 after losing about four per cent on the week.