BUSINESS

Canadian dollar lower, traders avoid risk following Greek elections

05/10/2012 08:54 EDT | Updated 07/10/2012 05:12 EDT
TORONTO - The Canadian dollar closed lower Thursday as traders continued to shun risk in the wake of elections in Greece last weekend that failed to produce a winner.

The commodity-sensitive currency failed to benefit from rising prices for oil and metals, dipping 0.08 of a cent to 99.83 cents US. It had earlier run as high as 100.23 cents.

Traders also took in the latest snapshot on the country's trade performance which, while improving month-over-month, came in slightly below expectations.

Statistics Canada reported that the trade surplus increased from $273 million in February to $351 million in March. Exports edged down 0.4 per cent while imports decreased 0.6 per cent during the month.

"The fall in two-way trade suggests that even after soft activity in February, there wasn’t much of a snap-back in trade in March," observed CIBC World Markets economist Emanuella Enenajor.

The currency has lost almost a full US cent over the past three days as traders avoided riskier assets such as commodities and resource-based currencies like the loonie.

Markets were nervous Thursday as talks to form a Greek government dragged into a fourth day after no party won enough votes to form an administration.

Analysts expect these talks will go nowhere and that Greeks will go back to the polls in June.

There are some hopes in the markets that in new elections some Greeks who want the country to remain in the euro currency bloc will support the main pro-euro parties, facilitating the creation of a moderate coalition government.

In the meantime, Greece is being held together by an international bailout. And analysts warn that Greece could run out of money as soon as next month without a government to negotiate the next level of its bailout.

Meanwhile, the June crude contract on the New York Mercantile Exchange gained 27 cents to US$97.08. Greek uncertainty and worries about slowing economic conditions have pushed oil down sharply from US$106 at the beginning of this month.

Copper prices were up three cents to US$3.69. Demand concerns had pushed the metal down almost five per cent from May 1.

Bullion prices gained $1.30 to US$1,595.50 an ounce.

Traders also took in Chinese data showing slower than expected exports and imports in April, which raised fears the world’s second-biggest economy wasn’t doing enough to stimulate domestic demand amid an economic slowdown.

Imports edged up 0.3 per cent to US$144.8 billion in April while exports rose 4.9 per cent to $163.3 billion, leaving a surplus of $18.4 billion, according to customs data released Thursday.

That compared with a surplus of $5.35 billion in March and a deficit of $31.5 billion in February.

China has been an important prop for a global economy still in the midst of a fragile recovery from the 2008 financial collapse and subsequent recession. Its huge appetite for energy and metals has boosted commodity prices and oil and mining stocks on the TSX.