Egypt unrest pushes Canadian dollar below greenback parity

The Canadian dollar closed below parity with the greenback for the first time in a month on Friday as protests in Egypt sparked a flight to safety across global markets that boosted the US dollar. The currency hit its lowest level in more than a week, falling to C$1.0018 to the US dollar or 99.82 US cents, during the session.
Crude oil prices surged, most stock markets sank and the US dollar rallied as images of anti-government protests and street battles in Egypt raised concerns the unrest will intensify and spread across the Middle East. "The general risk appetite waned obviously with the events in Egypt and it's changing perceptions a little bit on the US dollar," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
While the fading risk appetite is negative for the Canadian dollar, the gain in oil prices helped keep a cap on the commodity currency's losses. "We would have been worse off throughout all of this if oil prices weren't up as well, but mostly people are taking a backseat to the US dollar as a result of the safe-haven bid," Chandler said.
The currency closed the North American session at C$1.0011 to the US dollar, or 99.89 US cents, down from Thursday's close of C$0.9932 to the US dollar, or $1.0068. The Canadian dollar was 0.6 percent lower on the week, closing below par with the greenback for the first time since December 29.
RBC said Friday's close above C$0.9977 exposes new Canadian dollar support levels of C$1.0031 and C$1.0208. Resistance is now seen around C$0.9910, followed by C$0.9837. The currency came under some pressure early in the day following solid US economic growth data that was seen supporting the US currency more than Canada's.
"It was a very firm report, very constructive and under normal conditions, we would expect that bond yields for example would be up significantly on that," Chandler said. "In fact, bond yields are down, so it's telling you that risk aversion is really weighing on things here." Looking to Monday, the market will be watching Canadian economic growth figures for November.
Canadian bond prices erased early losses and climbed across the curve alongside US Treasuries as the Egyptian tensions boosted the safe-haven appeal of government debt. Canadian bonds outperformed their US counterparts across most of the curve. The two-year bond rose 9 Canadian cents to yield 1.681 percent, while the 10-year bond gained 24 Canadian cents to yield 3.247 percent.