June 28, 2012 / 1:33 PM / in 5 years

Canadian Dollar stumbles on fading EU summit hopes

TORONTO (Reuters) - Canada’s dollar fell against its U.S. counterpart on Thursday in tandem with the euro and global stocks, with investors skeptical that a major European Union summit would produce new measures to stem the region’s debt crisis.

Pessimism pushed the single currency to a three-week low, while yields on 10-year Spanish bonds soared above 7 percent ahead of the Thursday meeting in Brussels. <MKTS/GLOB>

“The likelihood of any concrete, actionable outcome from the summit is probably fairly low in people’s minds,” said Matt Perrier, director of foreign exchange sales at BMO Capital Markets.

“The markets are a little softer here on anticipation we’ll just get more of the same lip service to the problem.”

The two-day EU leaders’ meeting is expected to produce a broad roadmap for fiscal, financial and political union across the 17-nation currency bloc.

But German Chancellor Angela Merkel has brushed aside demands from Italy and Spain for rapid action to lower their soaring borrowing costs.

Merkel also dimmed hopes about proposals backed by France for euro zone countries to assume joint liability for each other’s debts.

At around 9:00 a.m., the Canadian currency was at C$1.0295 to the greenback, or 97.13 U.S. cents, down from The currency’s Wednesday’s finish at C$1.0255 to the greenback, or 97.51 U.S. cents.

Perrier said the currency will likely stay within a range of C$1.0230-C$1.0340 versus the greenback, seen in recent weeks, given low expectations the European summit will produce significant measures to combat the three-year-old debt crisis.

The Canadian dollar mostly underperformed against major currencies including the commodity-linked Australian dollar and the euro.

Apart from Europe, other factors added to the sour market mood.

JPMorgan was in focus on a report that recent trading losses could reach $9 billion and Barclays stock was down sharply in the aftermath of a probe into the manipulation of interbank lending rates.

As well, economic data showed the U.S. economy slowed as expected in the first quarter.

Canadian bond prices were largely higher across the curve, with the two-year Canadian government bond up 8 Canadian cents to yield 0.954 percent, while the benchmark 10-year bond gained 34 Canadian cents to yield 1.689 percent.

Editing by Jeffrey Hodgson

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