Tags: Dollar

Dollar Dips Below Parity With Canadian Dollar

Tuesday, 06 Apr 2010 11:24 AM

The dollar jumped versus the euro Tuesday on concerns over aid to Greece, but was briefly worth less than the Canadian currency for the first time since July 2008.

Greek borrowing costs soared as investors worried that a European bailout plan involving the International Monetary Fund could fall apart.

The 16-nation euro dropped to $1.3368 in morning trading in New York from $1.3486 late Monday. Investors are worried that a European bailout plan involving the IMF will not be able to contain the country's debt problems after reports that Greek officials want to try to avoid the IMF's involvement — a crucial part of the plan. Greek officials on Tuesday denied that Greece was seeking to revise the debt deal.

Debt woes in European countries, particularly Greece, have pushed the euro down from above $1.51 in late November.

The Canadian currency, meanwhile, has gotten a boost from rising energy prices. Canada is a major exporter of oil, and crude prices are circling 18-month highs. Canada also has one of the smallest budget deficits of the major economies.

The dollar dropped as low as 99.92 Canadian cents Tuesday. That's the first time the U.S. currency has dropped below parity with its Canadian counterpart since July 2008. In later morning trading in New York, the dollar fetched 1.0003 Canadian dollars, down from 1.0031 Canadian dollars late Monday.

The sharp gains in the Canadian currency may cause the Bank of Canada to threaten to intervene in foreign exchange markets, said UBS analyst Geoffrey Yu. A stronger currency makes Canada's exports more expensive.

In other trading, the British pound fell to $1.5179 from $1.5298 amid uncertainty over the outcome of Britain's upcoming election. British Prime Minister Gordon Brown has called for an election on May 6, but polls show a winner is uncertain. A "hung" government without a majority is seen as weak, which could be problematic given the U.K.'s debt problems.

The dollar slipped to 93.95 Japanese yen from 94.24 yen late Monday. On Monday, the dollar hit 94.76 yen, its highest point since August 2009.

An interest-rate hike by the Reserve Bank of Australia also helped boost the Australian dollar to 92.34 U.S. cents versus 92.10 U.S. cents late Monday. Rising interest rates can prompt investors to transfer funds as they seek out higher returns.

Meanwhile, the U.S. currency rose to 1.0709 Swiss francs from 1.0624 francs.

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