Loonie falls on Europe downgrades, but ends up on week

Fri Jan 13, 2012 5:34pm EST
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By Jon Cook

TORONTO (Reuters) - The Canadian dollar fell against its U.S. counterpart on Friday as rating downgrades on several euro zone countries, including France and Italy, prompted worried investors to seek safety elsewhere.

The Canadian currency slid, but far less than the euro, which tumbled more than a cent on the downgrade talk leading up to S&P's official announcement after the bell.

The large selloff in euro positions led to some profit-taking later in the day, which helped markets rally into the afternoon. For the week, euro shorts rose to a record 155,195 contracts as currency speculators increased their bets in favor of the U.S. dollar, according to data from the Commodity Futures Trading Commission released on Friday.

"We've seen some interest at the euro crosses, which has probably helped add to the bid tone in the euro so that's caused some of the equities markets to recover as well," said David Bradley, a director of foreign exchange trading at Scotia Capital.

The Canadian dollar ended the North American session at C$1.0227 to the U.S. dollar, or 97.78 U.S. cents, down from Thursday's finish at C$1.0183 to the U.S. dollar, or 98.20 U.S. cents.

It gained back nearly 1 cent after hitting a session low at C$1.0320, or 96.80 U.S. cents. For the week the currency rose 0.4 percent, from C$1.0165 to the U.S. dollar, or 98.35 U.S. cents.

Losses were cushioned by more signs of North American economic strength as data on Friday showed U.S. consumer sentiment in January rose to its highest level in eight months while the U.S. trade deficit in November was the biggest in five months.

Additionally, Canada posted an unexpected trade surplus in November as a strengthening U.S. economy helped push exports to a three-year high.   Continued...