Dollar drops amid eurozone worries
May 8, 2012 by The Canadian Press
The Canadian dollar was lower Tuesday as traders avoided risky assets such as commodity-based currencies as Greece was unable to form a government following indecisive weekend elections.
The currency fell 0.26 to 100.44 cents US, also pressured by sliding prices for oil and copper amid demand worries.
“As concerns increase over the U.S. growth outlook and the consequences of political change in Europe, risk appetite is decreasing,” observed Scotia Capital chief currency strategist Camilla Sutton.
Voters punished the two parties that have overseen Greece’s harsh austerity measures and left no party with enough votes to form a government. Now, another election looks increasingly likely for the country, which is being supported by bailouts.
But analysts warn that Greece could run out of money as soon as next month without a government to negotiate the next level of its financial bailout.
Commodity prices lost ground because if Greece can’t stay solvent, it risks falling out of the eurozone, with potential knock-on effects throughout the global economy.
As it is, the economies of many heavily-indebted eurozone countries are worsening as tough austerity measures adopted to rein in spending are crushing growth.
Markets operated under a cloud of uncertainty on Monday after weekend elections in Greece and France led to a sharp shift in the political landscape with the focus shifting away from austerity. In France, President Nicolas Sarkozy was thrown out of office by voters opposed to his belt-tightening program and replaced by Socialist Francois Hollande, who wants growth to become a more central plank of Europe’s debt crisis resolution.