Canadian dollar received a boost earlier, but the good news has since faded. A short-lived risk rally helped the loonie higher, but now concerns over what’s next for Europe have sent the currency down against the US dollar as uncertainty sets in and increases the demand for safe haven.
Once the news of the Spanish bailout was released, riskier assets received a boost. Canadian dollar was part of that rally, benefitting as Forex traders enthusiastically looked for risk and the yield that comes with it. Unfortunately for high beta currencies, Forex traders and other investors quickly soured on the Spanish bailout news. The situation solves none of the eurozone problems; some say it merely delays the inevitable.
So, with risk appetite fading again, the Canadian dollar is losing ground against the US dollar. It’s not helping that oil prices are below $84 a barrel. Loonie relies on oil for support, and dropping oil prices, along with the dissipation of risk appetite, are weighing on the Canadian dollar. Until there is more solid progress made in the eurozone, loonie is likely to find it difficult to sustain lasting gains against the US dollar.
At 14:51 GMT USD/CAD has gained to 1.0277, up from the open at 1.0223. GBP/CAD is up to 1.5929 from the open at 1.5857. EUR/CAD is lower, though, at 1.2865, down from the open at 1.2918.
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