Forex - USD/CAD firms as euro sends greenback down

Investing.com - The Canadian dollar rose against its U.S. counterpart on Friday after approaching the pair's lowest levels for 2012 on the coattails of a rising euro, which sent the greenback falling and demand for higher-risk assets like the Canadian dollar rising.
 
In U.S. trading on Friday, USD/CAD hit 1.0216, up 0.20%, up from a low of 1.0139 and off a high of 1.0227.

The pair sought to test support at 1.0139, the earlier low, and resistance at 1.0284, the high of Jan. 13.

Thank the euro for the Canadian dollar's bounce back.

The euro hit a recent four-month low on fears Greece is teetering closer to exiting the eurozone, possibly pressuring Spain and others to follow suit.

Greece is headed for parliamentary elections in June, and fears are building that anger over austerity measures slapped on the country in exchange for bailout money will result in strong showing among politicians opposed to harsh rescue-funding terms.

European officials are working on a contingency plan should Greece exit the eurozone, which would include minimalizing the fallout.

"A year and a half ago there maybe was a risk of a domino effect," says European Union trade commissioner Karel De Gucht, according to newswire reports.

"But today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn't make it. A Greek exit does not mean the end of the euro, as some claim."

De Gucht's words coupled with sentiment that the euro has fallen far enough sent currency rising and the dollar falling across world markets on Friday.

Hints of loose monetary policies out of the U.S. also pushed the greenback down.

Earlier this week, the U.S. Federal Reserve released the minutes of its latest monetary policy meeting, in which members suggested they would favor stimulating the economy should recovery veer off course.

"Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough," the Federal Reserve minutes read.

The Canadian dollar has taken a beating in recent sessions due to a broader rush to the greenback despite Canada's overall economic health, and the euro's recovery sent the pair rising on Friday.

The Canadian dollar, meanwhile, was down against the euro and down against the yen, with EUR/CAD up 0.73% and trading at 1.3042 and CAD/JPY down 0.44% at 71.41.