The Canadian dollar closed below the opening level today as Fitch Ratings came in and knocked down the positive market sentiment by signaling that France’s top credit ranking may be in danger.
Fitch maintained top AAA sovereign rating of France, but changed the outlook from stable to negative. The rating agency explained its reasoning:
The Negative Outlook is prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone, as reflected in the Rating Watch Negative placed on the sovereign ratings of several Euro Area Member States (EAMS) on 16 December 2011. As Fitch commented in its report on 23 November, ‘French Public Finances’, the fiscal space to absorb further adverse shocks without undermining its ‘AAA’ status has largely been exhausted.
The United States also disappointed markets as its inflation wasn’t growing in November. That’s better than the October decline, but economists hoped for some increase, even if by just 0.1 percent.
The Canadian currency was gradually rising at the beginning of the trading session, but the negative news resulted in a sharp decline.
USD/CAD rose from 1.0348 to close at 1.0337 after falling intraday to 1.0296. EUR/CAD closed at 1.3534, rising from the opening rate of 1.3466 and the daily low of 1.3424. CAD/JPY was at 74.87 as markets closed, while it opened at 75.18 and touched the high of 75.54 during the session.
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