C$ sinks to 3-week low on EU summit doubt

Thu Jun 28, 2012 4:44pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar fell to a three-week low on Thursday against the U.S. currency, with investors doubtful that a major European Union summit would produce new measures to stem the region's debt crisis.

Pessimism pushed the euro to its lowest level in more than three weeks, while investors dumped Spanish and Italian debt and pushed yields above the 6.25-percent mark as the meeting in Brussels began. <MKTS/GLOB>

"All eyes are on Europe. Until we get a clearer announcement from Europe risk aversion continues to be the dominant trading factor," said Dean Popplewell, chief currency strategist at OANDA.

"We're looking for a stronger financial system ... some pledge towards growth, some sort of debt relief, further debt relief for the periphery countries," he said.

Popplewell said without such pledges the Canadian currency could fall to a low of C$1.05 against the U.S. currency in the near term.

The Canadian currency ended at C$1.0328 to the greenback, or 96.82 U.S. cents, after touching a low of C$1.0363, its weakest since June 6. The currency finished Wednesday's North American session at C$1.0255 to the greenback, or 97.51 U.S. cents.

European finance officials were working on urgent measures to ease financial market pressure on Spain and Italy, which are too big to bail out, as EU leaders began a summit on Thursday deeply divided over how to resolve the euro zone's debt crisis.

Matt Perrier, director of foreign exchange sales at BMO Capital Markets, said the weakness in the currency reflected market doubt the meeting will produce significant measures.   Continued...