MD: Canadian dollar ahead on rising optimism about Greek bailout, higher commodities
TORONTO - The Canadian dollar advanced Friday morning amid higher commodity prices and rising optimism that Greece will get a crucial bailout.
The currency gained 0.18 of a cent to 100.53 cents US as traders also took in inflation numbers that came in slightly above expectations.
Statistics Canada reported that higher gasoline prices led to Canada’s annual inflation rate rising two notches to 2.5 per cent in January.
As well, underlying core inflation — which excludes volatile items such as some fresh food and gas — rose to 2.1 per cent, one tenth of a percentage point higher than the Bank of Canada’s target.
Optimism that Greece will clinch a €130 billion has grown amid reports that the European Central Bank will swap its holdings of an estimated €50 billion of Greek government bonds for new bonds to ensure that it doesn’t take losses in a debt restructuring. The ECB bought most of the bonds at a deep discount while attempting to hold down Greek borrowing costs and would realize a profit on the exchange.
Also, Germany appeared to abandon its effort to delay the release of the bulk of the bailout money until after Greek elections expected to take place in April.
And on Friday, France’s Finance Minister Francois Fillon told RTL radio that the Europeans must honour their commitments, now that the Greek Parliament and party leaders have met key conditions.
Earlier this week, markets had become vexed by worries that Greece could be forced into a disorderly default on a vital €14.5 billion bond repayment due next month. A deterioration in relations between Greece and its partners in the eurozone, particularly with Germany, had prompted speculation that a default may be brewing.
There are growing expectations that the bailout will be approved during a meeting of eurozone finance ministers on Monday.
Rising commodity prices also supported the loonie as the March crude contract ran up 52 cents to US$102.83 a barrel.
Crude has jumped from US$96 earlier this month as a surge in stock markets suggests investor confidence in the U.S. economic outlook is improving.
Rising fears that a military conflict will erupt over Iran’s nuclear program and block oil supplies from reaching markets has also helped push crude prices higher.
However, some analysts are starting to worry that rising fuel costs will undermine consumer spending and stymie economic growth.
Metal prices also advanced as the March copper contract in New York gained a penny to US$3.80 a pound.
And April gold gained $7.80 to US$1,736.20 an ounce.
