Forex Focus - The U.S. dollar fell to a two-day low against its Canadian counterpart on Tuesday, as sentiment found support after euro zone ministers ratified the terms of a bailout agreement for Spain’s banking sector.
USD/CAD hit 1.0164 during U.S. morning trade, the lowest since July 6; the pair subsequently consolidated at 1.0176, shedding 0.16%.
The pair was likely to find near-term support at 1.0138, the low from July 6 and resistance at 1.0220, Monday’s high.
Traders continued to eye talks between EU finance ministers later in the day in Brussels, after their euro zone counterparts held a previous meeting on Monday.
Euro zone ministers agreed to make EUR30 billion in aid available to assist Spain’s struggling banking sector by the end of the month, while also supporting plans to extend Spain’s deficit target deadline by one year to 2014.
Spain’s 10-year government bonds eased sharply to 6.82% earlier, moving below the critical 7% threshold which is widely seen as unsustainable in the long term.
Markets were also awaiting a ruling by Germany's top court on whether the EU's permanent bailout fund is compatible with national law.
But the greenback remained supported amid concerns over a deeper-than-expected slowdown in China after official data showed that Chinese exports and imports in June slowed from the previous month, as weakening global demand weighed.
Elsewhere, the loonie, as the Canadian dollar is also known, was higher against the euro, with EUR/CAD dipping 0.3% to trade at 1.2511.
Also Tuesday, data showed that Canadian housing starts rose to 222,700 units in June from 217,400 units in May.
Analysts had expected Canadian housing starts to dip to 205,000 units in June.