The Canadian dollar sagged against the U.S. currency on Tuesday, pressured by weak oil prices and a firmer U.S. dollar as worries about Greece's fiscal health continued to keep investors on edge.
Mounting concerns that European Union leaders may not reach a decision this week over possible support for Greece kept the euro close to a three-week low hit on Monday and fanned risk aversion, supporting safe-haven flows into the U.S. dollar.
The fundamental picture for the Canadian dollar remains positive, market watchers say, but the currency has been rattled by worries of European sovereign debt levels, which has been reflected in a slightly softer tone in equity markets and prompted safe haven flow to the U.S. dollar.
"People are still somewhat apprehensive about what's going to occur with the bigger (U.S.) dollar and, in turn, that's going to further dampen Canadian dollar strength," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets. The currency's weakness comes after the Canadian dollar hit a near 20-month high last week, sparking a flurry of debate
over when parity to the U.S. dollar might arrive.
"People are still watching parity very closely but we need to see some momentum and some of the short dollar/Canada positions rebuild themselves after being stopped out through
this last run up into the low $1.02s," he added.
At 7:35 a.m. EDT, the currency was at $1.0217 to the U.S. dollar, or 97.88 U.S. cents, down slightly from Monday's finish at $1.0188 to the U.S. dollar, or 98.15 U.S. cents.
The Canadian dollar was also pressured on Tuesday by weak oil prices, a key Canadian export, which fell toward $81 U.S. a barrel as the firmer greenback weighed. Bond prices were flat to slightly higher, in line with U.S. Treasuries where prices were firm ahead of a slew of supply
this week worth $118 billion U.S.
The two-year government bond was a hair higher, up one Canadian cent at $99.79 to yield 1.613%, while the 10-year bond climbed five Canadian cents to $102.35 to yield 3.449%.
