BUSINESS

Canadian dollar closes lower as traders avoid risk, data shows inflation rise

07/20/2012 08:44 EDT | Updated 09/19/2012 05:12 EDT
TORONTO - The Canadian dollar's latest run towards parity with the U.S. dollar stalled Friday as traders avoided risky assets such as the loonie and commodities amid another day of worries about the eurozone debt crisis.

The currency was down 0.48 of a cent to 98.75 cents US after closing at a two-month high Thursday. The dollar hasn't closed above parity since May 8.

Traders took in data showing inflation well under control as Statistics Canada reported that the country’s annual inflation rate rose 0.3 of a percentage point to 1.5 per cent in June, from 1.2 per cent the previous month.

On a month-to-month basis, the consumer price index fell 0.4 per cent from May.

The increase in the annual rate was mostly attributed to effects from the same period a year earlier, when gas prices were receding and the cost of new automobiles fell by over three per cent.

The latest round of eurozone worries were sparked as the yield on Spain’s benchmark 10-year bond ran up to over seven per cent, a rate considered to be unsustainable.

Yields rose even as finance ministers from the 17 euro countries approved a bailout for Spanish banks.

But investors fear that the Spanish government could, in the meantime, face new costs helping its banks and could eventually need rescue loans itself.

Oil prices slipped after rising Mideast tensions sent crude up by almost $3 on Thursday.

The August crude contract on the New York Mercantile Exchange fell $1.22 to US$91.44 a barrel.

Crude rose about five per cent last week as the oil market responded to a series of events that have raised concerns that Iran will try to block oil shipments through the Strait of Hormuz, a narrow waterway in the Persian Gulf through which one-fifth of the world’s oil travels every day.

Metals were also lower with copper down nine cents to US$3.45 a pound. Bullion gained $2.40 to US$1,582.80 an ounce.