Forexpros – The U.S. dollar extended gains against its Canadian counterpart on Monday, as a relief rally triggered by Sunday’s Greek election results fizzled out amid concerns over Spain’s mounting borrowing costs.
USD/CAD hit 1.0279 during early U.S. trade, the pair’s highest since Friday; the pair subsequently consolidated at 1.0264, gaining 0.49%.
The pair was likely to find support at 1.0191, the session low and a one-month low and resistance at 1.0324, the high of June 12.
Safe haven demand was boosted after the yield on Spanish 10-year bonds surged to a euro-era high of 7.28% amid concerns that a EUR100 billion bailout agreed earlier this month may not be enough to overhaul the country’s ailing banking system.
The 7% threshold is widely considered unsustainable in the long run and is the level at which Greece, Ireland and Portugal were forced to seek international bailouts.
Meanwhile, the yield on Italian 10-year bonds ticked up to 6.10% amid fears over sovereign debt contagion.
Investors were also jittery amid concerns over the ability of Greece’s pro-austerity New Democracy party to form a strong coalition government following Sunday’s narrow election victory.
The Canadian dollar also came under pressure from sharply lower crude oil prices, light with crude futures for delivery in July tumbling 3% on the New York Mercantile Exchange, to trade at USD82.51 a barrel.
Raw materials, including oil account for about half of Canada’s export revenue.
The Canadian dollar shrugged off official data showing that foreign investors’ acquisitions of Canadian securities rose significantly more-than-expected in April, rising to CAD10.16 billion, far outstripping expectations for a CAD5.0 billion increase.
The loonie, as the Canadian dollar is also known, was fractionally lower against the euro, with EUR/CAD inching up 0.08% to hit 1.2923.
Also Monday, leaders from the Group of 20 nations were to begin a two-day summit in Mexico.
Forexpros
