May 7, 2012 / 12:32 PM / in 5 years

C$ falls near parity after Europe elections

TORONTO (Reuters) - The Canadian dollar stumbled to the lowest level against its U.S. counterpart in almost three weeks on Monday on worries that anti-austerity election results in Europe could thwart the region’s drive to contain its debt crisis.

Investors fled riskier assets after the two pro-bailout parties in Greece failed to win a parliamentary majority, rekindling fears over the country’s future in the euro zone.

Greece’s vote, combined with the victory of Socialist Francois Hollande over incumbent Nicolas Sarkozy in a French presidential election, will raise pressure on Europe’s paymaster, Germany, to pursue a more growth-oriented approach to the crisis.

“In France it seemed to be largely expected ... people were maybe a little more surprised at the more tenuous coalition that could exist in Greece,” said David Tulk, chief Canada macro strategist at TD Securities.

“This is consistent with a theme that as good as we think that things are in Europe, we still are nowhere near out of the woods, so prepare for more volatility in the interim.”

At 8 a.m. (1200 GMT), the Canadian dollar was at C$0.9967 versus the U.S. dollar, or $1.0033, down from Friday’s finish at C$0.9955 versus the U.S. dollar, or $1.0045. Earlier, the domestic currency touched a low of C$0.9988, or $1.0012, its weakest level against the greenback since April 17.

Tulk noted that the parity level still stood out as significant support for the U.S. dollar against Canada‘s.

“(The Canadian dollar) has held in reasonably well, even the euro has been still within its recent range,” he said.

”That probably reflects the fact that some of these results, at least from the core perspective were somewhat expected,“ he said.”

The signs of a renewed political crisis in Europe came just as Friday’s downbeat U.S. nonfarm payrolls report dealt a blow to hopes of recovery for the world’s largest economy.

Canadian bond prices tracked U.S. Treasuries higher across the curve. <US/>

Canada’s 2-year bond up 4 Canadian cents to yield 1.232 percent, while the benchmark 10-year bond climbed 35 Canadian cents to yield 1.982 percent.

Reporting By Claire Sibonney; editing by Jeffrey Benkoe

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