February 14, 2012 / 2:53 PM / 6 years ago

U.S. data, Europe fears drag on Canadian dollar

TORONTO (Reuters) - The Canadian dollar eased against its U.S. counterpart on Tuesday, falling back through parity on the back of weaker than expected U.S. economic data and persistent uncertainty about the outcome of Europe’s debt crisis.

Data showed U.S. retail sales rose less than forecast in January as consumers cut back on car purchases and did less online shopping.

The release further weighed on fragile risk sentiment after Moody’s put the United Kingdom’s Aaa rating in jeopardy for the first time late Monday and warned it may cut France and Austria as well. Moody’s also downgraded six euro-zone nations, including Spain and Italy.

Positive market reaction from German data suggesting that Europe’s bulwark economy is picking up pace and a successful Italian bond auction was short-lived.

“The Canadian dollar is reacting to the general (U.S.) dollar move. It’s caught a bit of a bid tone here in the start of the North American trading session,” said Matt Perrier, a director of foreign exchange sales at BMO Capital Markets.

Risk from the euro zone remained in the forefront of investors’ minds as Greece’s government rushed to find 325 million euros in budget cuts to satisfy euro zone finance ministers deciding whether to sign off on a rescue package to save the country from a chaotic default.

“Focus is back to whether or not we get passage of the austerity in Greece and what’s going to happen with the (private sector involvement) deal,” Perrier said.

At 9:20 a.m., the Canadian currency stood at C$1.0001 versus the U.S. dollar, or 99.99 U.S. cents, down from Monday’s North American session close at C$0.9993 versus the U.S. dollar, or $1.0007.

Perrier put near-term Canadian dollar support at Friday’s low of C$1.0040, followed by C$1.0075 and C$1.0155.

“The general U.S. dollar bid tone has filtered into dollar/Canada and we’ve bounced back to the upper third of our overnight range but still well within established ranges, and waiting for a break at one way or the other really,” he added.

Canadian bond prices climbed across the curve, mimicking U.S. Treasuries amid the risk-off mood. Canada’s two-year bond rose 3 Canadian cents to yield 1.078 percent. The 10-year bond added 25 Canadian cents to yield 2.043 percent.

Reporting by Claire Sibonney; Editing by Chizu Nomiyama

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