Canada Dollar Falls as Euro Fears Soar

Added: April 27, 2010

In currency trading on Tuesday, investors grew even more concerned regarding the euro. Investors turned to less risky investments to avoid euro zone debt problems.

Canadian Dollar

The Canadian dollar fell as a result of the trade off in risks. The Canadian dollar is seen as a riskier investment of the US dollar and as such, investors turned from it to the US dollar throughout trading on Tuesday.

The US dollar moved to two cents above parity with the Canadian counterpart by trading at midday but it let go of some of its gains by the end of the day. It reached as high as C $1.0182 but ended at C $1.0140. This change is from C $1.0019 on late Monday. That was a drop initially of 1.1 percent before it recovered some of those lossess.

The Canadian dollar is seen as a rather safe investment, though it is not as safe as the US dollar or the ultra safe Japanese yen, hence the sell off on the day.

Euro Zone Debt Concerns

On Tuesday, credit ratings agency Standards & Poor’s Ratings Agency moved Portugal’s long term government debt down by two slots. It also further moved Greece’s sovereign debt problems into the junk territory. The move from the agency is a sign that the agency has doubts that Greece has the ability to implement reforms that are necessary. There is significant concern over Portugal’s debt problems as well, though the country says it would have no problem repaying its debt. Standards & Poor believes that Portugal will be unable to deal with its high debt levels especially since the country already has a weak economic outlook.

The euro fell on Tuesday below US $1.32 level for the first time since April 2009. The euro fell as low as US $.3165 which is a fall of 1.4 percent. When compared to the yen, the euro fell by more than 2 percent, to 122.8 yen. When looking at the dollar index, the US rose 1.1 percent for the day to 82.313.

Also affecting the euro in Tuesday trading is the stock market. As the New York Stock Exchange fell by 213 points on the day, the euro continued its fall as well. That is the largest fall for a one day loss that the market has seen since February.

Australia and New Zealand Dollars

As the global marketplace continued its sell off of the riskier currencies to head for higher ground in the US dollar and the Japanese yen, the Australian dollar and New Zealand dollar also fell. These currencies are less risky than the euro, but traders still looked to the US dollar instead.

The New Zealand dollar moved to $1.8505 during trading against the euro. It hit as high as NZ $1.8650 on Monday’s trading which is a two year high for the currency. The Australian dollar moved to A $1.4382 after it also hit a record high during trading last week of A $1.4512.

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New and Different Tone Being Set

Posted by Jeanine O'Reilly at Apr 29, 2010 02:28 AM

Germany’s Merkel is certainly singing a different tune this week. With the downgrading of Greece, Portugal and Spain’s credit ratings, she is now saying that talks of aid need to “speeded up now.” She was the primary obstacle to the European Union giving aid to Greece months ago because it would set a precedent. She indicated she believed the euro would suffer more in the long run if the EU gave loans to Greece. But maybe she was trying to get the IMF to enter the picture because originally the IMF was not planning on getting involved. In all fairness it is understandable that none of the financing organizations or the EU want to reward member nations for poor financial management. But the lack of action over the last few months has certainly exacerbated the problem. My understanding is that Austria and Italy could be next. I am no sure how weak the euro will get against the US dollar but it is somewhat interesting that it is holding up better than would be expected. This seems to show investors have some confidence that the EU will be able to successfully this crisis.