Dollar hits six-week low on U.S., EU woes

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Claire Sibonney
Toronto— Reuters
Published Monday, Nov. 21, 2011 8:42AM EST
Last updated Monday, Nov. 21, 2011 8:53AM EST

The Canadian dollar hit a six-week low against the U.S. dollar Monday as fears about government debt and deficits on both sides of the Atlantic prompted another global selloff in riskier assets.

Taking some of the attention off Europe where investors sought growing yield premiums to hold Italian and Spanish bonds, in the United States a congressional “super committee” failed to agree on deficit-cutting measures.

Republican and Democratic leaders are set to declare defeat after three months of talks broke down on deep divides over taxes and spending, which means putting U.S. finances on a stable path will likely have to wait until 2013 at the earliest.

“It’s really hard to generate a lot of enthusiasm for the U.S. dollar, so people seem to be holding their nose and buying it at the present time or holding their nose and buying everything else,” said David Watt, senior currency strategist at RBC Capital Markets, noting the greenback would be doing better if it wasn’t for the U.S. super committee issues.

“You have Canada’s largest trading partner throwing an anchor off the back of the economy starting in January. So that growth dynamic - which has been favorable for Canada from the perspective that U.S. numbers have been holding up better than elsewhere - is an open question today.”

At 8:15 a.m., the Canadian dollar stood at $1.0354 (Canadian) against the U.S. dollar, or 96.58 (U.S.), down from Friday’s North American session close at $1.0272 (Canadian), or 97.35 (U.S.). cents. Earlier, it hit a low of $1.0369 (Canadian), 96.44 (U.S.). cents, its weakest level since Oct. 10.

Canadian government bond prices rose alongside U.S. Treasuries on safe-haven demand.

The two-year bond added 6 Canadian cents to yield 0.880 per cent, while the 10-year bond gained 35 Canadian cents to yield 2.091 per cent.