C$ sags as investors doubt Europe summit

Mon Jun 25, 2012 4:36pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar fell against its U.S. counterpart on Monday and bond prices rose as global markets were rattled on investor fears policymakers at a European summit this week would make little progress in solving the region's debt crisis.

The euro weakened broadly, global equities fell sharply and the U.S. dollar and the price of North American government debt rose as investors sought safety ahead of the June 28-29 meeting of European Union leaders. On Monday, Cyprus became the fifth euro zone country to seek EU aid.

"We have a general risk-off day so we have oil prices weaker, equity prices weaker, as I think there's concern that the EU summit will disappoint at the end of the week, and that global growth concerns are a major worry," said Camilla Sutton, chief currency strategist at Scotiabank.

The Canadian currency finished at C$1.0292 to the greenback, or 97.16 U.S. cents. Earlier, it touched C$1.0318, its weakest against the greenback since June 12.

It finished its North American session on Friday at C$1.0246 to the greenback, or 97.60 U.S. cents.

The negative backdrop had been set as Spain formally requested euro zone rescue loans on Monday to recapitalize banks that are laden with bad debts. Later, Cyprus announced it was seeking a lifeline for its banks and its budget.

Cyprus joins Greece, Ireland, Portugal and Spain in seeking EU rescue funds, meaning more than a quarter of the 17 euro zone members are now in the bloc's emergency ward. Italy's funding costs have soared too, which means it could be next.

German Chancellor Angela Merkel dashed any lingering hope in financial markets that Europe would issue common euro zone bonds to underpin its single currency after Spain formally became the fourth state to request a financial rescue.   Continued...