The loonie was down 0.13 of a cent to 98.78 cents US, off early lows as geopolitical concerns pushed oil to its highest level in eight months.
Traders mulled over the final report on the December eurozone services Purchasing Managers Index which came in at 48.8.
That figure was better than expected but a reading below 50 still indicates a contraction in the service sector and reinforces the belief that the eurozone is still likely headed for recession this year.
Other data showed that orders to U.S. factories rose 1.8 per cent in November, following two months of declines. But demand for goods that signal business investment plans, such as computers and electronic equipment, dropped 1.2 per cent following a 0.9 per cent decline in October. The category is closely watched because it is a good proxy for business investment.
At the same time, there was relief as Germany successfully auctioned €4.06 billion in 10-year bonds despite concerns over the debt crisis that’s afflicting the 17-nation eurozone. Demand for the bonds outstripped supply as investors placed bids for €5.14 billion of the debt securities. The average interest yield was a low 1.93 per cent, down from 1.98 per cent in November.
The German auction was closely watched after a bond sale late last year failed to sell a third of the bonds on offer.
But there are worries about other refinancings.
Italy, the recent focus of the crisis, must borrow to cover €53 billion in expiring debt in the first quarter alone in a series of debt auctions beginning Jan. 13.
Meanwhile, traders are looking to employment data at the end of the week for reassurance the U.S. will be able to avoid slipping back into recession. Economists expect that the U.S. economy cranked out about 140,000 jobs during December, up from 120,000 in November.
Canadian jobs data also comes out Friday.
Commodity prices were mixed with the February crude contract on the New York Mercantile Exchange up 26 cents to US$103.22 a barrel, its highest settlement since May 10.
Prices surged more than $4 Tuesday in the wake of the manufacturing data and threats from Iran.
On Tuesday, Iran ended 10 days of naval manoeuvres with a warning to the U.S. military to stay out of the Persian Gulf. Iran has threatened to close the key oil passageway Strait of Hormuz as possible retaliation to new U.S. economic sanctions. The U.S. has said it will not tolerate such a move.
The soft economic data helped erase a nine-cent gain in copper prices Tuesday, as the March contract in New York closed at US$3.43 a pound.
Bullion prices gained $12.20 to US$1,612.70 an ounce after running up almost $40 on Tuesday.