Dollar tugged lower by data, Europe caution

Wed Feb 22, 2012 4:32pm EST
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By Jennifer Kwan

TORONTO (Reuters) - The dollar sank against its U.S. counterpart on Wednesday as weak European and Chinese economic data sapped investor appetite for riskier assets, while worries about Greece continued to infuse an element of uncertainty.

Concerns revolved around the health of the euro zone economy as data showed the services sector shrank this month along with manufacturing. The weakness was echoed in China, where data showed export orders fell in their worst performance in eight months.

As well, persistent worries that Greece will struggle to meet the demands of its new bailout deal added to the uncertain tone for global shares. <MKTS/GLOB>

"Events in Europe are still largely the primary driver of concern, the primary driver of risk sentiment," said Mazen Issa, macro strategist at TD Securities.

"Most specifically, it seems to be most strongly correlated with the S&P 500."

The currency shrugged off strength in Toronto stocks, which got a big boost from gold prices as technical buying pushed the price of the metal to a three-month high. .TO<GOL/>

The Canadian dollar ended at C$1.0004 versus the U.S. dollar, or 99.96 U.S. cents, slightly off the currency's finish at C$0.9966, or $1.0034, on Tuesday.

David Watt, senior currency strategist at RBC Capital Markets, said he expects the currency to trade within a range of around C$0.9950 to C$0.9985 versus the greenback.   Continued...