TORONTO - The Canadian dollar closed lower Tuesday despite a sharp runup in commodity prices.
The loonie closed down 0.11 of a cent to 102.23 cents US amid a disappointing read on U.S. consumer confidence and more talk about further stimulus measures by the U.S. Federal Reserve.
The U.S. Conference Board's consumer confidence reading for August came in at 44.5, down sharply from July's reading of 59.5 and lower than the 52 level that had been expected.
The greenback weakened somewhat after the release of the minutes of the U.S. Federal Reserve meeting for Aug. 9, when the central bank decided to keep rates ultra-low until the middle of 2013, a decision that saw three Fed members dissent.
The minutes also showed that Fed officials discussed a range of actions, including another round of Treasury bond purchases by the Fed in response to the economy’s slowdown.
Fed officials in the end opted to keep rates low until at least mid-2013. They also added a second day to their September meeting. That raised speculation that the Fed would announce some further action after that meeting.
"The FOMC minutes did not really add all that much to the market debate, though it is clear that there are 'a few members' pushing for more stimulus," said Stewart Hall, senior currency strategist at RBC Dominion Securities Inc.
"The desire for more action belies a heightened degree of concern about the U.S. economy."
The Conference Board's latest consumer confidence survey was done during wildest stock market swings since the financial meltdown in 2008, amid worries about the U.S. government ceiling and economy .
Traders also considered a report released earlier Tuesday showing economic sentiment in the eurozone was worsening due to uncertainties about the future of the global economic recovery and the region’s worsening debt crisis.
The European Union’s economic sentiment index fell by a greater than expected 4.7 points to 98.3, its sixth consecutive decline, bringing the indicator below its long-term average of 100.
Germany, the eurozone’s largest economy, saw the biggest drop.
Meanwhile, Statistics Canada said Tuesday that Canada's overall current account deficit, an important measure of the country’s foreign trade, increased considerably in the second quarter. The agency said it widened by $5.3 billion to reach $15.3 billion.
Higher commodity prices failed to support the loonie while oil prices improved despite the weak consumer report, with the October crude contract on the New York Mercantile Exchange up $1.63 to US$88.90 a barrel.
The December bullion contract on the Nymex gained $38.20 to US$1,829.80 an ounce. while the September copper contract in New York gained three cents to US$4.14 a pound.