Loonie down amid sliding oil, copper prices
Canadian dollars (loonies) are pictured in Vancouver, B.C. Thursday, Sept. 22, 2011. The loonie tumbled more than two cents in early trading Thursday as investors turned to the U.S. dollar as a safe haven and commodity prices continued to fall. THE CANADIAN PRESS/Jonathan Hayward
TORONTO - The Canadian dollar closed lower Tuesday as traders avoided risky assets such as commodity-based currencies following indecisive weekend elections in Greece.
The loonie finished the day down 0.53 of a cent at 100.17 cents US after having fallen as low as 99.77 cents US. The currency was also under pressure from by sliding prices for oil and copper amid demand worries.
"As concerns increase over the U.S. growth outlook and the consequences of political change in Europe, risk appetite is decreasing," observed Scotia Capital chief currency strategist Camilla Sutton.
Voters punished the two parties that have overseen Greece's harsh austerity measures and left no party with enough votes to form a government. Now, another election looks increasingly likely for the country that is already being supported by financial bailouts.
Analysts warn that Greece could run out of money as soon as next month without a government to negotiate the next level of its financial bailout.
Adding to market unease were comments from the head of Greece’s Radical Left Coalition, which came a surprise second in Sunday’s election. Alexis Tsipras called upon Greece’s two main party leaders to renege on their support for the multibillion-euro international bailout that is keeping Greece afloat.
Commodity prices lost ground because if Greece can’t stay solvent it risks falling out of the eurozone, with potential knock-on effects throughout the global economy.
As it is, the economies of many heavily indebted eurozone countries are worsening as tough austerity measures adopted to rein in spending are crushing growth.
Commodities have also suffered in recent weeks because of indications of slowing economic performance in the U.S. and China.
The June crude contract on the New York Mercantile Exchange fell 93 cents to US$97.01 a barrel after going as low as US$95.52, its lowest level all year. Crude has slumped about 10 per cent since the beginning of the month on a deterioration of the global growth outlook.
Copper prices are also down sharply from May 1, losing about 3.5 per cent. The July contract was down another 10 cents to US$3.68 a pound on Tuesday. Copper is viewed as an economic bellwether as it is used in so many industries.
Bullion prices also backed off, down $34.60 to US$1,604.50 an ounce, the lowest close since Jan. 3.
Markets also operated under a cloud of uncertainty caused not only by weekend elections in Greece but also in France where there was also a sharp shift in the political landscape.
President Nicolas Sarkozy was thrown out of office by voters opposed to his belt-tightening program and replaced by Socialist Francois Hollande, who wants growth to become a more central plank of Europe’s debt crisis resolution.
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