TORONTO (Reuters) - Dollar weakened against its U.S. counterpart on Monday, weighed down by soft commodity prices as European economic and political uncertainty hit investor confidence about global growth.
Global currency and stocks markets were rattled by data that showed the euro zone’s business slump deepened at a far faster pace than expected in April, suggesting the economy will stay in recession at least until the second half of the year.
Investors were also digesting the victory in the first round of France’s presidential poll of the Socialist Francois Hollande, who has promised to renegotiate a European budget pact.
Also the Dutch government, a close ally of Germany in calling for tougher austerity measures to fight the crisis, was preparing to resign because of a crisis over budget cuts.
“Risk flare-ups seem to be coming up again with weak PMI numbers across the euro zone overnight, some concerns over the upcoming French elections and the failure of the Dutch budget talks, potentially prompting an early election there,” said Matt Perrier, a director of foreign exchange sales at BMO Capital Markets.
“That’s all weighing on risk sentiment to start off the week.”
At around 8:10 a.m. EDT (1210 GMT), the Canadian dollar was at C$0.9973 against the greenback, or $1.0027, down from Friday’s finish at C$0.9926 against the greenback, or $1.0075.
The developments overshadowed last week’s Group of 20 vow in which leading world economies pledged $430 billion in new funding for the International Monetary Fund, more than doubling its lending power in a bid to protect the global economy from the euro-zone debt crisis.
With little market-moving North American data to speak of, traders and strategists will look to moves overseas for direction.
“We’ll continue to monitor events in Europe -- watch equity performances, watch peripheral bond spreads. We’ll take our cue off that,” said Perrier. He sees the Canadian dollar trading in a range of about C$0.9940 to C$1.0045 versus the U.S. currency in the near term.
Canadian government bond prices were mostly higher with the two-year bond up 4 Canadian cents to yield 1.332 percent. The benchmark 10-year bond climbed 30 Canadian cents to yield 2.028 percent.
Reporting By Jennifer Kwan; Editing by Chizu Nomiyama