WASHINGTON - Can the coins jingling in your pocket trace your movements? The Defense Department is warning its American contractor employees about a new espionage threat seemingly straight from Hollywood: It discovered Canadian coins with tiny radio frequency transmitters hidden inside.

This photo released by the Central Intelligence Agency shows a hollow container, fashioned to look like an Eisenhower silver dollar, which is still used to hide and send messages, or film, without being detected. Because it resembles ordinary pocket change, it is virtually undetectable as a concealment device. [AP]

In a US government report, it said the mysterious coins were found planted on US contractors with classified security clearances on at least three separate occasions between October 2005 and January 2006 as the contractors traveled through Canada.

The US report doesn't suggest who might be tracking American defense contractors or why. It also doesn't describe how the Pentagon discovered the ruse, how the transmitters might function or even which Canadian currency contained them.

Further details were secret, according to the US Defense Security Service, which issued the warning to the Pentagon's classified contractors. The government insists the incidents happened, and the risk was genuine.

"What's in the report is true," said Martha Deutscher, a spokeswoman for the security service. "This is indeed a sanitized version, which leaves a lot of questions."

Top suspects, according to intelligence and technology experts: China, Russia or even France - all said to actively run espionage operations inside Canada with enough sophistication to produce such technology.

The Canadian Security Intelligence Service said it knew nothing about the coins.

"This issue has just come to our attention," CSIS spokeswoman Barbara Campion said. "At this point, we don't know of any basis for these claims." She said Canada's intelligence service works closely with its US counterparts and will seek more information if necessary.

Experts were astonished about the disclosure and the novel tracking technique, but they quickly rejected suggestions Canada's government might be spying on American contractors. The intelligence services of the two countries are extraordinarily close and routinely share sensitive secrets.

"It would seem unthinkable," said David Harris, former chief of strategic planning for the Canadian Security Intelligence Service. "I wouldn't expect to see any offensive operation against the Americans."

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