Canada dollar recovers after drop on Europe elections

Mon May 7, 2012 4:46pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar recovered on Monday after stumbling to its lowest level in almost three weeks against its U.S. counterpart on worries that anti-austerity election results in Europe could thwart the region's drive to contain its debt crisis.

The currency fought higher and retraced moves in global equity and commodity markets, which sold off overnight after the defeat of incumbents in weekend elections in Greece and France. The results of the elections heightened the uncertainty of the path ahead for the euro-zone debt crisis. <MKTS/GLOB>

"There was an initial reaction to some of the uncertainty from the European elections, which brought commodities down, equities down, basically risk assets. There's basically a retracement of a lot of those moves," said Greg Moore, foreign exchange strategist at TD Securities.

Earlier the Canadian dollar touched a low of C$0.9988, or $1.0012, its weakest level against the greenback since April 17.

It finished the session at C$0.9930 versus the U.S. dollar, or $1.0070, slightly higher than Friday's finish at C$0.9955 versus the U.S. dollar, or $1.0045.

An anti-austerity backlash by voters in Greece and France shook the euro zone on Monday, causing jitters for the euro currency and stock markets amid doubts about whether Greece has a future in the euro.

But by midday on Monday world markets took political upheaval in Europe largely in stride, with the euro recovering from sharp losses and local equity markets up. <MKTS/GLOB>

"I think this market was pretty well positioned for the results that came out. It's a little bit of the sell-the-rumor, buy-the-fact scenario unfold," said Matt Perrier, director of foreign exchange sales at BMO Capital Markets.   Continued...