Oil, copper and other commodities closed sharply lower Tuesday in the face of continued debt troubles out in Europe.
Oil shed 2.08 per cent of its value, or $1.46 US a barrel, to $68.75 on the New York Mercantile Exchange, while copper plunged 3.35 per cent, or 10 cents US a pound, to $3.04 US a pound. The broader commodities measure contained in Reuters/Jefferies dropped 1.26 per cent and has lost almost 16 per cent from its peak in early January. Gold, seen as a safe haven against declining currencies, added $4 US to $1,198.00.
"Oil is being dragged lower by all of the tensions in the world," Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York, told Bloomberg.
"The Korean situation, Europe's debt crisis and now the Spanish banks, really everything but oil news. There's a flight to quality and away from risky assets."
That flight sent investors into the safe haven of the U.S. dollar as concerns mounted over the bailout of a small Spanish bank over the weekend, a spreading European debt crisis and the potential impact on the global economy.
The U.S. dollar index, a measure of the world's reserve currency against six other major currencies, rose 0.47 per cent by about 4 p.m.
The Canadian dollar, meanwhile, dropped 92 basis points to 93.46 US cents.
"Risk aversion has moved dramatically higher, which is seeing massive unwinding of long Canadian dollar (and commodity currencies) positions," Scotia Capital currency strategist Camilla Sutton wrote in a note. "Today's move has already been large, however the risk remains that there is further unwinding ahead" which will push the U.S. dollar higher against the Canadian dollar.
Oil may also have been hurt by a gain in inventories expected to be reported on Wednesday.
