Dollar firms on Greek debt deal hopes

Tue Feb 7, 2012 5:09pm EST
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By Jon Cook

TORONTO (Reuters) - The Canadian dollar firmed against its U.S. counterpart on Tuesday, as commodities were boosted by renewed optimism that a Greek debt deal was near.

A range of commodity linked currencies like the Canadian dollar rallied on news Greece was close to terms on a bailout, after a Greek official said Athens was drafting a list of austerity reforms needed to clinch a new financial package.

Failure to secure the 130 billion euro ($170 billion) rescue would mean Greece faces a messy debt default that could destabilize the entire European Union.<MKTS/GLOB>

"The worst-case scenario, which is a disorderly default and Greece being cut off from the EU, no longer seems imminent," said David Woo, head of global rates and currencies research at Bank of America Merrill Lynch. "From the market's standpoint, at least for the time being, more orderly conditions are going to prevail."

The Canadian dollar finished at C$0.9948 to the U.S. dollar, or $1.0052, up slightly from Monday's finish of C$0.9955, or $1.0045.

Canada's move against the greenback trailed the euro's, which hit an eight-week high at $1.3270 against the U.S. currency. <FRX/>

"People look at the Canadian dollar as basically a very low-beta U.S. dollar," said Woo. "So when the U.S. dollar goes down the Canadian dollar is not going to go up as much against the U.S. dollar than some of the other currencies."

Despite the Canadian currency's rise above the 1-to-1 level with the U.S., some analysts predict it will end the year significantly weaker.   Continued...