C$ hits 2-week low as euro zone efforts flounder

Wed Sep 26, 2012 4:56pm EDT
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar hit a two-week low against the U.S. currency on Wednesday, tracking weaker global stock and commodity markets, as worries over Spain's commitment to reform added to persistent unease over the global economic outlook.

World shares fell and the euro slipped to a two-week low amid a second day of violent anti-austerity protests in Madrid and talk of secession by Spain's wealthy Catalonia region. Spanish Prime Minister Mariano Rajoy, who had been reluctant to ask for help, vowed that he is committed to fiscal and structural reforms.

A general strike in Greece and signs of discord among top euro zone officials over new policies to tackle the crisis added to investor concerns, taking the gloss off recent moves by the European Central Bank to calm markets by buying bonds.

"What's going on under the surface, or at least had really defined the market earlier in the day, is that all the progress that we'd made in the last couple of weeks with respect to Europe had basically run a little ahead of itself," said David Tulk, chief Canada macro strategist at TD Securities.

"We're in this waiting period right now for Spain to get its act together ... The bears are a little bit louder than the bulls today."

Concern over the euro zone's ability to tackle its financial crisis has sparked a sharp rise in volatility on equity markets, leading to the worst day since June for the S&P 500 index on Tuesday and subsequent falls across Asia. <MKTS/GLOB>

"There's no one thing in particular the market's focusing on. We've just had this constant drip-feed of what's been taken as negative news," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.

"None of them is really new, nothing that we didn't already know, but the fact that it's just been relentless all day, really, has given us this negative tone for risk generally and that's weighing on the Canadian dollar."   Continued...