MN: Loonie drops as investors continue to shun risk
The Canadian dollar fell against its U.S. counterpart Thursday to touch a 9-week low as fears that Greece's debt crisis may spread to other euro-zone countries battered investor confidence.
Canada's dollar touched a low of C$1.0408 to the U.S. dollar, or 96.08 U.S. cents, its weakest level since March 2, as world shares fell and the euro touched a 14-month low on escalating fears the Greece's debt crisis could sweep other euro zone states.
``We have ongoing focus with what's going on in the euro zone,'' said David Watt, senior currency strategist at RBC Capital Markets.
Watt added another key area of focus Thursday will be a meeting of the European Central Bank, which is expected to leave interest rates unchanged. However, market watchers will be closely watching any commentary around the Greece's debt crisis, which saw deadly riots in Athens on Wednesday and pressure building on Spain, Portugal and others.
At 7:35 a.m., the Canadian dollar was at C$1.0330 to the U.S. dollar, or 96.81 U.S. cents, down from Wednesday's finish at C$1.0297 to the U.S. dollar, or 97.12 U.S. cents.
``We'll sort of wait and see how market sentiment develops throughout the day, specifically on equity markets,'' said Watt.
``Are people prepared to today go through a period of reflection or are we going to be selling equities and selling risk again, which would catch the Canadian dollar as well.''
But the commodity-linked currency could recoup some of its recent losses, if U.S. stocks move higher. Stock index futures turned negative on Thursday morning after previously pointing to a higher open.
The currency could be supported by the price of crude oil, a key Canadian export, which hovered near $80 a barrel on Thursday. Oil had hit a six-week low as fears that Greece's economic crisis may spread to other European nations raised uncertainty over future global energy demand.
Despite the powerful influence of external factors, a Reuters poll released on Wednesday forecast that the Canadian dollar will remain near parity with the greenback for at least the next six months, but will weaken off a year from now.
