The Canadian dollar has been weakening against the greenback since Friday as risk aversion swept through the markets over fears of a sovereign debt default in Europe and the United States.
European bank stress test results last Friday did little to calm fears that the euro zone crisis is getting worse.
“(The Canadian dollar) softened off a fair bit. Most things are working against it,” said Camilla Sutton, chief currency strategist at Scotia Capital.
Meanwhile, falling crude oil prices also dragged down the Loonie,as fears of a U.S. debt default increased market jitters and increased speculation that the International Energy Agency (IEA)might release stock from its emergency reserves. Since, Canada is a major oil exporter, the Canadian Dollar is a commodity-linked currency and so is affected by changes in oil prices.
Investors will now shift their focus to Thursday’s emergency meeting of EU leaders, when a second bailout package for Greece will be under discussion, as well as the looming Aug. 2 deadline in the U.S. debt ceiling negotiations.
The Canadian Dollar has lost 115 pips against its U.S. counterpart since Friday. USDCAD climbed to a high of 0.9634 today from Friday’s low of 0.9518.
The Bank of Canada interest rate announcement is tomorrow , though it is expected to keep rates unchanged at 1.00%.