Loonie tugged lower by doubts over Greek bailout

Tue Feb 21, 2012 4:33pm EST
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday on investor doubt about the implementation of a long-awaited second bailout deal for Greece.

After 13 hours of talks, euro zone ministers finalized a 130 billion euro ($172 billion) agreement after forcing Athens to commit to unpopular budget cutbacks and for private bondholders to accept deeper losses, ensuring the government can meet a debt repayment due next month.

But European shares ended lower in thin volume, with investors cashing in on recent highs, as the bailout failed to completely soothe concerns about the future of the euro zone's most troubled country.

"We had an agreement for Greece, which I think is generally positive, but I think most of that was already factored into markets before the long weekend," said Camilla Sutton, chief currency strategist at Scotia Capital.

"I think the reality is there is no easy, quick solution for Europe so that is still front and center."

The Canadian dollar finished at C$0.9966 versus the U.S. dollar, or $1.0034, off from Monday's close at C$0.9924, or $1.0077. On Friday, it closed the North American session at C$0.9957 versus the U.S. dollar, or $1.0043.

Most Canadian markets were closed on Monday for a holiday, as was Wall Street.

The deal was offset by worries the austerity plan would severely weaken Greece's already struggling economy and make it harder for Athens to repay its debts. The sharp cuts in the value of bonds held by private creditors also mean it will be hard for the country to borrow from capital markets again.   Continued...