C$ stumbles as European fears overhang

TORONTO: Canada's dollar sank against its US counterpart on Thursday, once again touching its lowest level since January, as investors fretted about the health of the global economy following weak economic data from Europe, China and the United States.

Global stocks, the euro and other assets considered risky fell as data suggested Europe's debt woes were spreading and worsening a global economic slowdown, adding to investor concerns about Greece's possible departure from the euro zone.

"It's been another day of unsettled markets," said Steve Butler, managing director of foreign exchange trading at Scotiabank. "Markets have been up and down all day with people closely following the situation in Greece."

The Canadian dollar, ended at C$1.0271 versus the US dollar, or 97.36 US cents, down from W ednesday's close a t C$1.0242 versus the US currency, or 97.64 US cents.

The currency weakened as far as C$1.0296, matching the four-month low hit on Wednesday, on broader market uneasiness over Greece's possible exit from the euro zone.

At least half of euro zone governments as well as banks and large companies are making contingency plans in case Greece decides to leave the single currency area, even though the preferred option is still for Athens to keep the euro.

The euro hovered just above a two-year low against the dollar in volatile trade on Thursday.      

Paul Taylor, chief investment officer at BMO Harris Private Banking, said the uncertainty in Europe could hit Canada disproportionately due to the country's exposure to resources, hurting the Canadian dollar.

"Investors would vote with their feet and would move into US dollars in a big way and even though we have a very strong federal fiscal situation here in Canada, we would definitely experience some sort of a selloff," he told a BMO conference call.

He said the Canadian currency, now worth more than 97 US cents, could weaken to the mid-90s level if the situation worsens.

Canadian government bond prices climbed across the curve with the two-year bond up 3 Canadian cents to yield 1.139 percent, while the benchmark 10-year bond edged 14 Canadian cents higher to yield 1.862 percent.

The yield on the 30-year bond hit a record low 2.38 percent.