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TORONTO (Reuters) - The Canadian dollar ended weaker against its U.S. counterpart on Monday as investors sought the safe-haven of the liquid U.S. dollar on fresh fears about Europe's debt crisis.
World stocks snapped a four-day rally, while the euro and oil prices dropped as a new round of fear gripped markets that Greece may default on its debt and trigger economic fallout that would cascade throughout the euro zone and possibly beyond.
But U.S. stocks and the euro recovered from their worst levels in late afternoon trade after Greece's finance ministry said the country was near an agreement with its international lenders to continue receiving bailout funds, though some work still needs to be done.
"The Canadian dollar is ending much weaker on the day, in line with other commodity-linked friends, though it is closing off of the lows, which is vaguely encouraging," said Camilla Sutton, chief currency strategist at Scotia Capital.
Sutton said the Canadian currency has been chalking up dramatic intraday moves but staying within a relatively tight range between C$0.9725 and C$1.0025 to the U.S. dollar as the greenback remains broadly stronger amid the European uncertainty.
But even when the Canadian currency sinks through parity with the U.S. dollar, as it did last week, its weakness has not been sustained, Sutton noted.
"Parity is a bit of a magnet ... so that's what most people are watching for," Sutton said.
The Canadian dollar ended the North American session at C$0.9897 to the U.S. dollar, or $1.0104 U.S. cents, down from Friday's North American session close of C$0.9790 to the U.S. dollar, or $1.0215 U.S. cents.
Sutton said the market is well prepared to hear a dovish tone from Bank of Governor Mark Carney when he speaks in New Brunswick on Tuesday, but that the bigger piece of the puzzle remained headlines from Europe.
Bond prices were higher across the curve as government debt attracted safe-haven flows.
The two-year bond was up 13.5 Canadian cents to yield 0.947 percent, while the 10-year bond was up 93 Canadian cents to yield 2.185 percent, near multi-year lows reached earlier this month.
Editing by Jeffrey Hodgson