November 1, 2011 / 12:38 PM / 6 years ago

Loonie slides as Europe fears dominate

TORONTO (Reuters) - The Canadian dollar tumbled more than two cents against the U.S. dollar on Tuesday, slipping back below parity as fears over the euro zone debt crisis and the collapse of broker-dealer MF Global darkened the outlook for the global economy.

Greek Prime Minister George Papandreou’s shock announcement on Monday that he will put Greece’s bailout to a referendum drew veiled threats from Germany on Tuesday and hammered global stock markets edgy over the region’s crisis.

The fallout from the collapse of MF Global Holdings MF.N also rippled through global exchanges, as operators moved to suspend the U.S. futures broker or limit trades of its customers.

“All the things that could go wrong for CAD are going wrong at the same time here,” said Camilla Sutton, chief currency strategist at Scotia Capital.

She noted that risk sentiment was also hurt by an unexpected fall in PMI data for China’s manufacturers and an interest rate cut by the Reserve Bank of Australia.

“The spike in risk aversion is really weighing on the near-term CAD outlook as is fears that China’s growth is slowing faster than expected and the RBA might see ... softer growth in China.”

At 8:11 a.m. (1211 GMT), the Canadian dollar stood at C$1.0149 versus the greenback, or 98.53 U.S. cents, down from Monday’s North American session finish at C$0.9967 to the U.S. dollar, or $1.0033.

Earlier, it sank as low as $1.0174, or 98.29 U.S. cents, more than two cents lower than Monday’s close to its weakest level in nearly a week.

Sutton expected the day’s range for the currency to hold between C$1.0080-C$1.0180.

Canadian government bond prices rallied across the curve, following U.S. Treasuries higher as investors scurried for safer investments. <US/>

The two-year bond rose 10 Canadian cents to yield 0.947 percent, while the 10-year bond climbed 77 Canadian cents to yield 2.199 percent.

Reporting by Claire Sibonney; Editing by Theodore d'Afflisio

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