Loonie slips as world growth jitters mount

Tue Aug 16, 2011 9:50am EDT
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By Ka Yan Ng

TORONTO (Reuters) - Canada's dollar was weaker against the U.S. dollar on Tuesday morning after disappointing domestic factory sales figures added to a world backdrop of slowing economic growth.

Worries about the global economy slowing more than expected were highlighted by data that showed stagnant growth in Europe's powerhouse, Germany, which knocked stocks lower and hit the euro.

The German data sharpened market focus on Tuesday's meeting in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel, with investors looking for any signs of new measures to contain the euro zone debt crisis.

Weaker prices for oil and other resources also pressured Canada's commodity-linked currency.

At 9:25 a.m., the Canadian currency was at C$0.9825 to the U.S. dollar, or $1.0178, down from Monday's North American finish of C$0.9799 to the U.S. dollar, or $1.0205. The currency rose more than a penny in the previous session.

"It's just giving back some of the gains that we got. And we're also waiting for what will come out from the meeting between Merkel and Sarkozy," said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York.

Canadian manufacturing sales for June plunged by a much greater than expected 1.5 percent from May, Statistics Canada data showed on Tuesday, another indication of soft second quarter growth.

Analysts had forecast a drop of 0.4 percent in June. Statscan slightly revised May's decline to 0.7 percent from an initial 0.8 percent.   Continued...