GB: Canadian dollar advances amid weaker oil prices, eurozone worries
TORONTO - The Canadian dollar was higher against the U.S. greenback Wednesday amid rising commodity prices while traders kept a wary eye on the eurozone debt crisis.
They also took in the latest reading on U.S. retail sales. Data for May showed sales dropped by 0.2 per cent, although most of the weakness was focused on a drop in gasoline prices.
The commodity-sensitive loonie was up 0.05 of a cent to 97.45 cents US.
Oil prices strengthened, with the July contract on the New York Mercantile Exchange ahead 50 cents at US$83.82 a barrel.
Bullion prices climbed $9.20 to US$1,623 an ounce while July copper edged up one cent to US$3.34 a pound.
Traders were cautious amid concerns about the effectiveness of a Spanish bank rescue announced over the weekend and a downgrade of the country's banks by ratings agency Fitch.
About €100 billion euros is being made available to Spain to aid banks mired in massive amounts of bad loans stemming from a collapsed real estate sector. But traders worry that the money will just add to the Spanish government’s already considerable debts and perhaps force it to seek its own sovereign bailout.
The lack of confidence has been expressed in bond markets where Spain has been forced to pay higher yields to attract buyers for its debt. The yield on Spain's benchmark 10-year bond dropped slightly Wednesday from euro-era highs to 6.72 per cent.
But the contagion has spread to other heavily-indebted countries. Italy paid 3.972 per cent interest rates — up from 2.34 per cent last month — to sell €6.5 billion in 12-month paper. The bond auction enjoyed strong demand. The sale was a warm-up for Thursday’s weightier longer-term paper auction.
The debt crisis is not just rattling financial markets, but also affecting households and businesses by creating uncertainty over the future of the economy.
The latest report from Eurostat, the EU statistics agency, showed industrial production in April among the 17 countries that use the euro slipped 0.8 per cent. Analysts noted that even that poor showing is worse than it seems because a cold Spring pushed up energy demand.
Investors are also nervously awaiting Greek elections on Sunday, when a party that iss threatening to renege on the country’s bailout terms could come away the big winner. That might force the country out of the euro.
