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Forex - USD/CAD close to 6-week high after S&P downgrade

Published 08/08/2011, 09:26 AM
Updated 08/08/2011, 09:26 AM

Investing.com – The U.S. dollar was up for a seventh day against its Canadian counterpart on Monday, trading close to a six-week high after Standard & Poor’s downgraded the U.S. debt rating, prompting investors to shun riskier assets.

USD/CAD hit 0.9882 during U.S. morning trade, the pair’s highest since June 28; the pair subsequently consolidated at 0.9870, gaining 0.51%.

The pair was likely to find support at 0.9741, last Friday’s low and resistance at 0.9911, the high of June 27.

Ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed Friday.

The ratings agency kept the U.S. rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and “America’s governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed.”

U.S. Treasury Secretary Timothy Geithner sharply criticized S&P’s decision, saying the ratings agency “has shown really terrible judgment and they’ve handled themselves very poorly”.

The loonie was also weighed after crude oil for delivery in September plunged 4% to trade close to a nine-month low of USD83.62 a barrel on the New York Mercantile Exchange.

Raw materials, including oil account for about half of Canada’s export revenue.

Meanwhile, the Canadian dollar was up against the euro, with EUR/CAD shedding 0.19% to hit 1.3997.

The euro was higher earlier after the ECB said in a statement late Sunday that it “will actively implement” its bond-buying program, indicating that it will likely buy Spanish and Italian government bonds.

However, the news failed to ease fears over the risk that the euro zone’s debt crisis could spill over to the region’s third and fourth largest economies.

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