TORONTO - The Canadian dollar closed more than a full cent lower than its U.S. counterpart on Monday as fears over Greece's debt rose and traders flocked to the safe haven of the greenback.
The loonie was off 1.11 cents to 101.04 cents US as investor concerns about Europe's debt crisis fuelled a stronger U.S. dollar.
Oil prices were off $2.26 cents to US$85.70 a barrel. Gold prices lost US$35.80 to $1,778.90 an ounce. Copper prices slid 15 cents to US$3.78 a pound.
Greece's finance minister and international debt inspectors ended a conference call Monday night without a decision on whether the inspectors will return to Athens, a vital point that could affect whether the nation gets more bailout funds or defaults on its debts.
European finance ministers said Friday they would delay authorizing a new instalment of emergency funds for Greece until October. Investors fear that the country will fail to convince lenders that it can pay its debts.
The Greek cabinet is preparing to devise new austerity measures, but the country risks not qualifying for an $11 billion instalment of the bailout package it received last year, as well as a second bailout worth $149 billion. If Greece were to default on its debt, other debt-laden European countries would likely be judged less credit-worthy and have difficulty borrowing money.
A wave of defaults in Europe could infect the global banking system and help put the brakes on a U.S. economic recovery, which would inevitably lead to a bigger slowdown in Canada. A global slowdown would mean less demand for crude, copper and other commodities.
"With no significant headway on European woes coming out of this weekend's Ecofin meetings, the markets have turned to risk aversion resulting in the U.S. dollar gapping higher," said John Curran, senior vice-president at CanadianForex.
"Global equities and commodities are all in negative territory as people await any news regarding the European debt situation to gauge the situation."
U.S. President Barack Obama proposed Monday a more than $3 trillion plan to shrink the nation's debt, with roughly half of the money coming from tax increases on the wealthy and corporations.
Obama's goal is try to influence a special joint committee of Congress that is charged by the end of November with coming up with deficit reductions of up to $1.5 trillion over 10 years. He wants lawmakers to aim even bigger.
Investors will also be closely watching Wednesday's interest rate policy announcement from the U.S. Federal Reserve.
Some expect the Fed to introduce new measures to help boost the economy, which is seeing a slowdown in growth. But, many analysts think the Fed will fall short of announcing another monetary stimulus program given inflation levels remain relatively elevated.
On Tuesday, Bank of Canada Governor Mark Carney will speak on recent economic developments.
On the Canadian calendar this week, investors can expect to see data on leading indicators, wholesale trade, the consumer price index and retail trade figures.