02/07/2012 08:53 EST | Updated 04/08/2012 05:12 EDT

Canadian dollar posts modest gain, traders look to key Greek debt talks

TORONTO - The Canadian dollar erased early losses and closed higher Tuesday as traders hopes that negotiations can yield an agreement that would allow Greece to secure an essential second bailout.

The currency was up 0.07 of a cent to 100.52 cents US, thanks in part to a turnaround in commodity prices midway through the session.

The loonie had earlier declined as low as 100.21 cents US as Greek debt woes had earlier strengthened the greenback.

Athens must secure a €130-billion bailout deal from the eurozone and the International Monetary Fund to avoid a March default on its bond repayments, which would cause havoc in the financial system.

But first Greek leaders had to agree on another series of harsh austerity measures.

Late Tuesday afternoon, a spokesman for Greece's private creditors says Greek Premier Lucas Papademos will soon tell eurozone finance ministers the contents of a deal to reduce the country's massive debt.

The fact that the Greek government will now brief the rest of the 17-nation eurozone on the deal is a sign that they believe a deal is now almost done.

The lower greenback and optimism Greece's political leaders can reach an agreement helped commodity prices recover from early lows.

A stronger greenback usually helps depress oil and metal prices, which are denominated in dollars, as it makes commodities more expensive for holders of other currencies.

The March crude contract on the New York Mercantile Exchange turned around and jumped $1.50 to US$98.41 a barrel. Prices had earlier been depressed on analyst estimates that crude inventories likely rose about 2.3 million barrels last week.

Crude supplies in the U.S. have increased for the past three weeks at a key Cushing, Oklahoma delivery point amid a mild U.S. winter.

Copper prices came back from early losses and closed up a penny to US$3.88 a pound.

The April bullion contract shook off early losses and advanced $23.50 to US$1,748.40 an ounce.

Traders also took in poor economic data from Europe's biggest economy.

Industrial production in Germany fell 2.9 per cent in December from the month before, suggesting the country's economic slowdown could be worse than expected.

The government has cut its estimate for 2012 growth from one per cent to 0.7 per cent as the crisis over too much government debt in some countries weighs on Germany and its trade partners in the 17-nation eurozone.

Traders also looked to U.S. Federal Reserve chairman Ben Bernanke and his testimony later in the morning before the Senate Banking Committee.