Canadian dollar stumbles in biggest weekly drop this year

Fri Feb 10, 2012 5:04pm EST
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By Jon Cook

TORONTO (Reuters) - The Canadian dollar's sustained run against the greenback hit a speed bump on Friday after a key bailout deal for Greece met with fresh resistance, putting the possibility of a disorderly default back on the table.

Just 24 hours after Athens agreed to tough wage and pension cuts demanded by international lenders, the deal looked set to collapse after euro zone leaders imposed further conditions on Greece to receive its next rescue package and the country's far-right leader said he could not vote in favor of the deal.

The timing was precarious, as Greece faces a deadline next week to secure a 130 billion euro ($172.95 billion) bailout from the International Monetary Fund and the European Union to finance massive bond redemptions coming due in March.

The news halted the Canadian dollar's rally, knocking it below parity with the U.S. currency and to its biggest weekly loss this year.

"Strength for the Canadian dollar is probably capped to some extent," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. "It's tough to see how long that can continue for, considering the global economic headwinds that are out there.

"There's probably more downside than upside," added Reitzes who saw the dollar's near-term range between C$0.99 and C$1.0070 to the U.S. dollar.

The Canadian currency finished at C$1.0028 to the U.S. dollar, or 99.72 U.S. cents, down from Thursday's close at C$0.9956 to the U.S. dollar, or $1.0044. It was the currency's lowest close this month the biggest weekly drop since December 12-16.

At one point on Friday, the currency was down nearly a cent at C$1.0040, before rebounding slightly after a report showed Canada's monthly trade surplus rose to a three-year high of C$2.7 billion in December.   Continued...