TORONTO - The Canadian dollar closed lower Monday as early relief that Spain was getting a bailout for its banking sector faded.
The commodity-sensitive loonie lost 0.4 of a cent to 96.97 cents US as early advances in oil prices turned to losses and the greenback strengthened.
Eurozone finance ministers said Saturday they would make up to €100 billion in loans available to the Spanish government to prop up banks, which are staggering under the weight of billions of euros of toxic assets from a collapsed real estate market.
Spain has yet to say how much of this money it will tap. It had been reluctant to seek help from the EU.
While traders were pleased to see some progress in dealing with Spain's banking sector, they realized that the bailout "does little to resolve the larger (European Monetary Union) crisis or contain contagion," observed Scotia Capital chief currency strategist Camilla Sutton.
"A sustained risk rally will need a clear and detailed long-term path for Europe, a fiscal plan for the U.S. and evidence that global growth is not being materially dragged lower by the European crisis."
Uncertainty about the bank bailout was also evident on bond markets. The rate on Spanish 10-year bonds — a direct measure of how much investors trust a country to pay its debt obligations — started the day around six per cent but the yield later rose to 6.47 per cent, edging closer to the seven per cent level that is deemed to be unsustainable.
Prices for oil and metals initially advanced but the July crude contract on the New York Mercantile Exchange ended the session down $1.40 to US$82.70 a barrel.
July copper was up six cents to US$3.34 a pound while August bullion in New York rose $5.40 to US$1,596.80 an ounce.
Investors also turned their attention to Greece, where voters head to the polls this coming weekend in an election likely to determine whether the debt-mired country will stick with the euro.
If Greece were to leave the common currency, that would raise questions about whether other countries might follow suit.
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