Canada dollar weakens to 3-month low on Greek political woes

Tue May 15, 2012 4:50pm EDT
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By Claire Sibonney

TORONTO (Reuters) - The Canadian dollar hit a three-month low against its U.S. counterpart on Tuesday after Greece said it would hold new elections, increasing investor fears about the country's possible exit from the euro zone.

Attempts to form a government in Greece collapsed on Tuesday, jolting financial markets with the prospect that leftists opposed to the terms of an EU bailout could sweep to victory in a June vote.

The news prompted heavy selling of stocks and commodity-linked currencies such as the Canadian dollar. <MKTS/GLOB>

Against the euro, however, the Canadian currency rallied to C$1.2775, or 78.28 euro cents, its strongest level since January 2011. It also gained against other major European currencies including the Swiss franc, sterling and the Swedish and Norwegian crowns.

"A lot of traders are looking to trade the CAD versus the crosses like the pound, the yen and the euro versus dollar/CAD by itself," said Gareth Sylvester, senior currency strategist at risk management firm Klarity FX in San Francisco.

Against the greenback, the Canadian currency hit a low of C$1.0074, or 99.27 U.S. cents, its weakest level since January 25.

The Canadian dollar ended the session at $1.0068 versus the U.S. dollar, or 99.32 U.S. cents, weaker than Monday's North American session finish at C$1.0029 versus the U.S. dollar, or 99.71 U.S. cents.

Analysts noted the currency has been confined to a range between C$1.01 and C$0.98 since late January.   Continued...