Canadian Dollar Gains vs. Euro After S&P Cut Greece’s Rating

The Canadian dollar advanced against the euro after Standard and Poor’s downgraded Greece’s credit rating, fueling concern that the nation may face default or even leave the Eurozone. The Canadian currency also rose against the US dollar and the Japanese yen.

S&P reduced long-term credit rating of Greece to BB- from B and suggested that further reductions may follow. The credit agency explained the reasons for the downgrade:

The downgrade reflects our view of increasing sentiment among Greece’s key eurozone official creditors to extend the debt payment maturities of their €80 billion of bilateral loans pooled by the European Commission. As part of such an extension, we believe the eurozone creditor governments would likely seek “comparability of treatment” from commercial creditors in the form of their similarly extending bond and loan maturities.

S&P also said that “a rescheduling of official debt that left commercial debt untouched would not constitute a default under our criteria but would likely signal declining creditworthiness”.

The pessimism about the situation with Greece’s debt allowed the loonie to outperform the euro. The Canadian currency had smaller success against safer currencies, like the yen, as the bad outlook for Europe’s economy diminished appeal of growth-related currencies, yet the loonie still managed to rise against such currencies.

EUR/CAD slipped from 1.3874 to 1.3814 as of 18:34 GMT today after rising to the intraday high of 1.3923. USD/CAD fell from 0.9664 to 0.9633, while CAD/JPY went from 83.27 to 83.87 before retreating to 83.32.

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