BUSINESS

Canadian dollar closes lower amid nervousness over U.S. budget debate

09/25/2013 08:35 EDT | Updated 11/25/2013 05:12 EST
TORONTO - The Canadian dollar closed lower Wednesday amid worries about the growing possibility of a U.S. government shutdown.

The loonie was down 0.11 of a cent to 96.96 cents US as investors monitored an acrimonious debate ahead of an Oct. 1 deadline for American political leaders to reach a deal on a temporary spending bill to keep the U.S. government fully open after the start of the new budget year.

The government also reaches it borrowing limit, or debt ceiling in October. If Congress doesn’t raise that limit, the government won’t be able to pay all its bills, a blow to confidence in the world’s biggest economy.

Treasury Secretary Jacob Lew says the government will have exhausted its borrowing authority by Oct. 17, leaving the United States with just $30 billion cash on hand to pay its bills.

If Congress doesn’t raise that debt limit, the government won’t be able to pay all its bills, a blow to confidence in the world’s biggest economy.

Republicans are demanding that any increase in the debt limit must result in expenditure cuts of an equal amount. President Barack Obama, a Democrat, is demanding a debt limit increase with no conditions attached.

Meanwhile, TD Bank improved its forecast for Canadian economic growth in the third quarter.

The bank said it now expects the Canadian economy to grow at an annual pace of 2.3 per cent compared with a June forecast for growth of two per cent.

For the full year, TD still expects the economy to grow by 1.7 per cent, and by 2.4 per cent in 2014.

On the commodity markets, oil prices moved lower as data showed that U.S. supplies increased by 2.6 million barrels last week, against a drop of 1.5 million barrels that analysts expected. The November contract on the New York Mercantile Exchange dropped 47 cents to US$102.66 a barrel.

Oil has dropped 6.7 per cent since closing at a two-year high of $110.53 on Sept. 6., reflecting a lower likelihood of air strikes against Syria and doubt about when the U.S. Federal Reserve may start to wind up its asset purchase program.

Metals were also higher with December copper ahead two cents to US$3.27 a pound.

December gold bullion gained $19.90 to US$1,336.2 an ounce.

Traders also looked to the major economic releases of the day.

U.S. durable goods orders during August were up 0.1 per cent following a 7.4 per cent drop in July. That was better than the flat reading that economists expected. Excluding the transportation sector, orders actually dropped by 0.1 per cent.

Other data showed that U.S. new home sales rebounded by 7.9 per cent in August to 421,000, the biggest one-month gain since January.