Dollar weakens after Greek deal hits snag

Fri Feb 10, 2012 10:55am EST
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By Jon Cook

TORONTO (Reuters) - The Canadian dollar slumped on Friday against its U.S. counterpart after a bailout deal for Greece met with fresh opposition, but the currency's slide was tempered by data that showed Canada's trade surplus unexpectedly rose to a three-year high in December.

Overnight the Canadian dollar had fallen below parity with the greenback for the first time in more than a week after the leader of a far-right party in Greece's coalition government said he could not back a recently negotiated debt bailout agreement, reigniting worries about a chaotic default. <MKTS/GLOB>

Athens faces a deadline next week to have a deal in place to secure a 130 billion euro ($172.95 billion) rescue package from the European Union to finance massive bond redemptions coming due in March.

The news knocked the euro from its two-month high on Thursday against the U.S. dollar. <FRX/>

Canada's currency has largely traded in step with the euro for much of the year, rising above the one-to-one level with the U.S. dollar. But the increased uncertainty over Greece had investors selling riskier currencies and buying the U.S. dollar on Friday.

"The news isn't coming out as expected, so rather than risk some catastrophic news, take some profit on positions," said Michael O'Neill, vice-president of foreign exchange trading at RJOFX Canada.

At 10:50 a.m. (1550 GMT), the Canadian dollar stood at C$1.0017 to the U.S. dollar, or 99.83 U.S. cents, down from Thursday's close at C$0.9956, or $1.0044.

Early losses were pared after a Statistics Canada report showed Canada's monthly trade surplus unexpectedly rose to a three-year high of C$2.7 billion in December.   Continued...