June 27, 2012 / 1:22 PM / 5 years ago

Canadian Dollar slips ahead of European summit

TORONTO (Reuters) - Canada’s dollar slipped against its U.S. counterpart on Wednesday as investor hopes faded that new measures from a high-stakes European summit this week would resolve the region’s debt crisis.

European leaders sound unusually divided before the summit, with Germany’s Angela Merkel saying total debt liability would not be shared in her lifetime and giving little support to Italian and Spanish pleas for immediate crisis action.

“We don’t expect much from the summit. Actually you can see there is a lot of divergence between Germany and other European leaders. It’s not looking like we’re going to get a new pact from there,” said Hendrix Vachon, senior economist at Desjardins Group.

“So the uncertainties are still there after the summit. In that situation, it will be a bad climate for currencies except for the U.S. dollar.”

At around 9:00 a.m., the Canadian currency was at C$1.0260 to the greenback, or 97.47 U.S. cents, down slightly from its Tuesday finish at C$1.0240 to the greenback, or 97.66 U.S. cents.

The euro fell for a third day against the dollar on Wednesday after hitting a two-week low in the prior session, and analysts cautioned more losses were likely ahead of the European summit that is not expected to deliver new measures to ease the region’s debt crisis. <FRX/>

The Canadian dollar has had a bumpy ride so far this year, swinging from its high above parity with the greenback at $1.02 in April to its low below 96 U.S. cents a few weeks ago.

Some analysts expect an even sharper depreciation, though the currency is down less than 1 percent year to date. In a research note on Tuesday, Capital Economics predicted the Canadian dollar will weaken to 92 U.S. cents by the end of this year and 86 U.S. cents by the end of 2013.

The research firm said the forecast was based partly on the prospect of further declines in commodity prices.

Canadian bond prices were higher across the curve with the two-year Canadian government bond up 2 Canadian cents to yield 1.001 percent, while the benchmark 10-year bond gained 14 Canadian cents to yield 1.730 percent.

Additional reporting by Claire Sibonney; Editing by Chizu Nomiyama

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