Canada dollar falls on weak oil, euro zone uncertainty

Tue Jul 10, 2012 4:27pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar slumped against its U.S. counterpart on Tuesday as investor optimism about the euro zone faded and investors focused on the possibility a German court could delay Europe's new bailout fund.

The market was also concerned about signs of a sharp slowdown in China and its potential impact on the global economy.

China, the world's second-largest economy, curtailed imports in June in further evidence that Europe's three-year-long debt crisis is dragging down economic activity around the world.

For June, China's crude oil imports plunged to their lowest levels of the year from a record high in May. The data helped to push oil prices sharply lower. <O/R>

"Today just seems like everything is sort of a downer day. We've got oil off now two bucks, equities all down across the board," said Don Mikolich, an executive director of foreign exchange sales at CIBC World Markets.

The euro slumped to a new two-year trough against the dollar after a meeting of euro zone finance ministers failed to ease concerns about the region's crisis.

Euro zone ministers struggled to reassure financial markets that an aid package for Spain they outlined overnight will help stabilize the currency bloc - a task made all the harder by a German legal challenge to its crisis-fighting tools. <FRX/>

Market sentiment was soured by the German Constitutional Court, which began a hearing into whether the euro zone's fund, known as the European Stability Mechanism, and planned changes to the region's budget rules are compatible with German law. Approval would pave the way for funds to be used more flexibly to ease the European debt crisis. <GVD/EUR>   Continued...

Images of the front and the back of the new Canadian 50 dollar bill, made of polymer, are seen on display before a news conference in Quebec City, March 26, 2012. REUTERS/Mathieu Belanger