April 8, 2010 / 12:27 PM / 7 years ago

Loonie slumps, loosens grip on parity

3 Min Read

TORONTO (Reuters) - The Canadian dollar loosened its grip on parity with the U.S. currency on Thursday, a day after nearing a 21-month high as oil prices retreated further and euro zone worries persisted.

Oil slipped for a second day toward $85 a barrel, pressured by a stronger U.S. dollar and a rise in U.S. crude stockpiles to their highest level in nearly 10 months, weighing on Canada's commodity-lined currency.

Fears about Greece's financial stability intensified, knocking European shares and U.S. stock market futures lower and driving the euro close to this year's low against the greenback.

"Canada has pulled back considerably after the party at parity," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.

"That seems to be a little bit over, but the Canada story has definitely been set aside just for the time being, and we're focusing back on what's going on with the big dollar and definitely the European implications."

Gavsie added the markets are also keeping a close eye on reports that China was close to announcing a shift in its currency policy involving a "small but immediate" revaluation of the yuan, which rose to its highest since October.

"If there is some movement on that band, then there is going to be obviously some movement in the currency markets. There will be spillover as to implications of the big dollar, euro and then commodities on the side."

The Canadian dollar touched a low of C$1.0093 to the U.S. dollar, or 99.08 U.S. cents.

On Wednesday, the currency drove as high as C$0.9977, or US$1.0023, its highest intraday level since July 15, 2008.

At 7:54 a.m. (1154 GMT), the Canadian dollar fell to C$1.0090 or 99.11 U.S. cents, down from Wednesday's close of C$1.0051 to the U.S. dollar, or 99.49 U.S. cents.

The next major Canadian economic report will be employment data for March, due Friday. The median forecast of 19 analysts is for a net gain of 25,000 jobs, slightly more than the 20,900 jobs added in February. None of the analysts expected job losses, with forecasts for creation ranging from 5,000 to 45,000.

Canadian bond prices were mixed across the curve and U.S. Treasuries were flat as the market braced for a $13 billion sale of a reopened 30-year Treasury bond and a U.S. government report on weekly claims for jobless benefits.

The two-year government bond added 3 Canadian cents at C$99.51 to yield 1.764 percent, while the 10-year bond lost 3 Canadian cents to C$101.03 to yield 3.617 percent.

Editing by Padraic Cassidy

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