BUSINESS

Loonie lower, traders avoid risk as new Greek elections set for next month

05/15/2012 08:59 EDT | Updated 07/15/2012 05:12 EDT
TORONTO - The Canadian dollar closed lower Tuesday after word that Greeks are again going to the polls to try to elect a government sent traders to the safe haven of U.S. Treasuries.

The currency lost 0.39 of a cent to 99.32 cents US.

No Greek party won enough seats in an election May 6. But voters did give support to political parties that want to cancel or renegotiate the terms of a massive international financial bailout that requires harsh austerity measures.

The prospect has raised fears that Greece may end up walking away from its debts, meaning an exit from the euro currency would be likely. And no one really knows what kind of fallout would hit the wider global economy.

The commodity-sensitive loonie also suffered from oil and metal prices, which declined as traders also avoided risky assets.

Demand concerns pushed the June crude contract on the New York Mercantile Exchange down cents to US$93.98 a barrel after closing Monday at its lowest level since just before Christmas.

The higher U.S. currency also impacted commodity prices. That is because these prices are denominated in U.S. dollars, and a higher greenback makes oil and metals more expensive for holders of other currencies.

Copper extended a series of losses that took the metal to its lowest level since mid-January. The July contract dipped four cents to US$3.52 a pound. Copper is viewed as an economic bellwether as it is used in so many industries. But prices have fallen sharply — down over seven per cent since May 1 alone — amid data showing a slowing global economy.

Gold bullion ticked $3.90 lower to US$1,557.10 an ounce after falling to its lowest close since late December.

The Canadian dollar had been higher Tuesday morning on some positive economic news from the eurozone. Data showed that a strong export performance from Germany helped the economy of the 17 countries that use the euro narrowly avoid a recession in the first three months of the year.

Eurostat, the EU’s statistics office, reported that the eurozone economy was flat when compared with the previous quarter, confounding expectations for a 0.2 per cent decline that would have put the eurozone back into recession. In the last quarter of 2011, the eurozone contracted by 0.3 per cent.

Germany, Europe’s biggest economy, was primarily behind the better than expected performance as a strong export performance helped it grow by 0.5 per cent.

Other countries are not faring nearly as well: Ireland, Greece, Spain, Italy, Cyprus, the Netherlands, Portugal and Slovenia are all in recession.

Other data out Tuesday showed U.S. retail sales rose 0.1 per cent in April, which met expectations. And U.S. consumer prices were flat in April as lower gasoline prices offset higher food and housing costs.