Canada dollar hits 4-month low on euro zone fears

Fri May 18, 2012 4:47pm EDT
 
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By Claire Sibonney and Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar hit a four-month low against its U.S. counterpart on Friday and fell for a fifth straight session, as surprisingly high domestic inflation data failed to shift investor focus away from Europe's deepening debt crisis.

The currency's move lower tracked broader risk aversion as overseas stocks erased this year's gains a day after Moody's cut its rating on Spanish banks en masse, heightening fears of contagion from the Greek political crisis.

"The lack of sustained response to the stronger-than-expected inflation speaks to a universal focus on all things euro zone," said David Tulk, chief Canada macro strategist at TD Securities.

Weakness in the Canadian dollar mirrored the performance of U.S. equities, which also lost ground as Facebook Inc made a modest market debut.

Looking ahead, investors will pay attention to an emergency meeting of G8 leaders on the weekend, before a Canadian market holiday on Monday.

"We'll see if there are any headlines over the weekend but we don't have a tremendous amount of optimism for any cathartic rally," added Tulk.

The Canadian dollar ended at C$1.0208 versus the U.S. dollar, or 97.96 U.S. cents, down from Thursday's North American session close at C$1.0191 versus the U.S. dollar, or 98.13 U.S. cents. For the week, the currency shed around 1.8 percent.

Overnight, the currency dropped as low as C$1.0227, or 97.78 U.S. cents, its weakest since January 16.   Continued...