Loonie tumbles on Greek fiscal woes

Canada's dollar tumbled more than a cent at noon Tuesday after European debt worries sent investors fleeing to the U.S. currency.

By late afternoon, the loonie slipped 1.7 per cent to 98.22 cents US. The fall came as the rating agency Standard & Poor's announced it had chopped the credit score of debt-plagued Greece to "junk bond" status.

S&P also knocked Portugal's rating down two notches to A-minus, or four levels above the Greek standard.

Both countries face huge debt burdens, with Greece actively seeking a bailout from the International Monetary Fund and others.

As Greece caroms toward possible bankruptcy, international traders are assessing their options.

"The nightmare scenario … is that either Greece defaults, forcing investors to take a severe 'haircut' on their investments-loans, or the Greek authorities could honour the country's debts and simply shut down all nonessential operations," said Jeremy Batstone-Carr, head of private client research at U.K. stockbroker Charles Stanley.

The Canadian dollar became collateral damage as investors decided to hold the U.S. greenback as a "safe haven" currency.

At its lowest point Tuesday, the loonie had lost 1.4 per cent of its value compared with Monday's close of 99.86 cents US.

Canada's currency was not the only national paper to get sideswiped in the rush to buy American dollars.

By late afternoon, the euro had lost 1.6 per cent and the British pound was off 1.3 per cent against the U.S. currency.