Risk aversion was the main driver today on the Forex market, as the week came to a close. With risk aversion rising, the Canadian dollar dropped, ending the week on a lower note against the US dollar.
Loonie weakened against the US dollar on the day following Thanksgiving, US equities fell on concerns about what is next for the eurozone. Troubles in Europe continue as bond yields rise, and as credit rating continue to drop; Belgium was the latest casualty.
Even though oil prices ended modestly higher today, they couldn’t help the Canadian dollar. There just isn’t the support for the high beta currencies right now as Forex traders worry about the eurozone. That means the Canadian dollar is caught in the crossfire, and heading lower, following other currencies considered riskier than the US dollar.
This week’s drop for the loonie adds to overall losses for the currency this year. So far, the Canadian dollar has weakened by 3.7 percent in 2011 — a far cry from the currency’s triumph in 2010. At any rate, it is likely that the loonie will continue to show weakness against the US dollar, since there is too much uncertainty about the future for Forex traders to be comfortable with it.
At 22:25 GMT USD/CAD is higher, up to 1.0468 from the open at 1.0472. GBP/CAD is about the same, ending at 1.6162, a slight difference from the open at 1.6163.
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