TORONTO (Reuters) - The Canadian dollar slumped to a more than three-month low against its U.S. counterpart on Friday, tracking a slide in equity and commodity markets, as the euro zone crisis was seen extending its reach to France and Germany, and investors worried about a looming U.S. “fiscal cliff.”
Growth in Germany, Europe’s largest economy, is likely to weaken in the next two quarters as firms postpone investments while France’s central bank said it expected the euro zone’s second-largest economy to slip into recession as 2012 ends.
Investors were wary, too, before a Greek parliament vote on Sunday on its 2013 budget. The budget must be passed to unlock a further tranche of international aid.
Meanwhile, in a speech at 1:05 p.m. EST (1805 GMT), newly reelected U.S. President Barack Obama is likely to discuss looming tax hikes and government spending cuts - the so-called fiscal cliff - that would go into effect by the end of the year, possibly driving the U.S. economy into recession unless Congress acts to prevent them.
“We have an overarching theme of U.S. dollar strength, we have oil prices having dropped into the low $84s and equity markets that are very weak,” said Camilla Sutton, chief currency strategist at Scotiabank.
Still, Sutton said the Canadian dollar was outperforming other major currencies.
“For Canada, it’s more a story of there hasn’t been any specific domestic news that has hurt us.”
Even better-than-expected Chinese economic data for October, which pointed to a modest rebound in the world’s second largest economy, failed to stem a selloff in riskier assets.
At 9:10 a.m., the Canadian dollar stood at C$1.0015 versus the U.S. dollar, or 99.85 U.S. cents, softer than Thursday’s North American session close at C$1.0004 to the U.S. dollar, or $0.9996.
Earlier, the currency slipped to C$1.0034, or 99.66 U.S. cents, its weakest level since August 3.
Sutton said C$1.0040 was the next significant level of resistance for the U.S. dollar versus Canada‘s.
The price of Canadian government debt rose across the curve. The two-year government of Canada bond was up 3 Canadian cents to yield 1.059 percent, while the benchmark 10-year bond added 25 Canadian cents to yield 1.685 percent.
Editing by Bernadette Baum