Canada dollar slides on Europe concerns

Wed May 9, 2012 4:36pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar slid to its lowest in three and half months on Wednesday, back below parity against the U.S. dollar, as persistent fears about the health of Spanish banks and a political impasse in Greece worsened fears about the euro zone debt crisis.

Greece's two mainstream parties rejected a coalition led by radical leftist Alexis Tsipras, forcing the country closer to having to re-run Sunday's inconclusive election that saw voters overwhelmingly reject its EU/IMF bailout.

Meanwhile, Spain will demand banks set aside another $45 billion against loans to builders as it battles to rebuild confidence, sources told Reuters. Huge bank losses have raised fears the country may need an international bailout. (ID:nL5E8G8H7H)

Concerns about the stability of the region pushed the Canadian currency to C$1.0064 against the U.S. dollar, or 99.36 U.S. cents, its weakest level since January 30.

"The Canadian dollar is a risk-sensitive currency. The European concerns are weighing," said Andrew Kelvin, senior fixed income strategist at TD Securities.

The currency finished at C$1.0009 versus the U.S. dollar, or 99.91 U.S. cents, down from Tuesday's North American session close at C$0.9983 versus the U.S. dollar, or $1.0017.

The Canadian dollar notched a mixed performance against its G10 currency cousins. It outperformed currencies such as the euro and New Zealand dollar, and reached a 2012 high of C$1.0062 against the Australian dollar. But it underperformed versus the greenback and the Japanese yen.

"People didn't want to believe that it would happen. It is happening - that Europe would rear its ugly head again," said John Curran, senior vice president at CanadianForex.   Continued...