WSJ: Canadian Dollar Down As Investors Shun Risk On Euro-Zone Worries
By Don Curren
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--The Canadian dollar is substantially lower against the U.S. dollar Wednesday morning as the debt crisis in the euro zone propels investors out of risk-sensitive assets.
The U.S. dollar was at C$1.0295 Wednesday, from C$1.0222 late Tuesday, according to data provider CQG. The euro, which dropped to C$1.2761, its lowest point since June 2010, on Tuesday has recovered slightly and is currently at C$1.2796.
While the Canadian dollar isn't typically considered as risk sensitive as its Antipodean cousins from Australia and New Zealand, it is nonetheless responsive to risk, and has increased its correlation with risk barometers such as equity indexes in recent trading.
RBC Capital Markets said a negative tone to risk held through the overnight session, once again centered on euro-area developments, with USD/CAD and EUR/USD have traded in near lock-step through much of the action.
"In the hours that followed the Egan Jones downgrade of Spain and ECB refusal to fund the recapitalization of Bankia via its lending facilities, USD/CAD traded gradually up to a Asian session high of 1.0256 before stabilizing," RBC said.
But the stability was short lived and the U.S. dollar's rally continued in London following weak Euro-area credit growth and confidence data, RBC said.
Trading was choppy in London, with USD/CAD dropping on news that the European commission is "willing to envisage direct ESM bank recapitalizations" but then recovering, RBC said.
The Canadian currency wasn't effected by news that Canadian producer prices were flat in April following three consecutive monthly gains as higher costs of fertilizer and gasoline were offset by lower prices for primary metal products, Statistics Canada said Wednesday.
The consensus call was for prices to edge up 0.1%, according to a report from Royal Bank of Canada.
Prices for raw materials used by manufacturers fell 2.0%, in line with expectations and the third straight monthly decline.
-Don Curren, Dow Jones Newswires; 416-306-2020; don.curren@dowjones.com
