The loonie was down 0.4 of a cent to 97.07 cents US after a Russian-based rival to Potash Corp. (TSX:POT) and other North American producers broke up a European marketing group that controls about 43 per cent of global exports.
Russia's OAO Uralkali plans to run at full capacity after changing its trading policy in a move that signals potash prices will weaken considerably.
Chief executive officer Vladislav Baumgertner said that the change in the company’s trading policy could drag potash prices to less than US$300 a ton, which is at least 25 per cent below the current contract price for China.
CIBC World Markets chief economist Avery Shenfeld noted that "potash production is a bit under a half per cent of Canadian gross domestic product, and represents about 1.5 per cent of Canadian goods exports."
"A drop of 25 per cent in volumes in the third quarter (is) not unreasonable, and it could in fact be 30 to 40 per cent, associated with production being curtailed as buyers sit and wait for lower prices," he added.
On the economic front, data showed that U.S. home prices jumped 12.2 per cent in May compared with a year ago, the biggest yearly gain since March 2006. The Standard & Poor’s/Case-Shiller 20-city home price index also surged 2.4 per cent in May from April, nearly matching the previous monthly gain of 2.6 per cent, the highest on record.
Other data showed consumer confidence dipped in July.
The New York-based Conference Board’s index of U.S. consumer confidence came in at 80.3, down from 82.1 in June and below expectations for a reading of 81. Still, the index remains well above year-ago levels.
Traders also looked ahead of the release of a series of key economic data this week.
Statistics Canada releases its reading on May economic growth on Wednesday. Economists predict gross domestic product will have grown by 0.3 per cent during the month.
Second quarter U.S. GDP data comes out Wednesday and it is expected that the economy grew at an annualized rate of only one per cent during the period. The U.S. non-farm payrolls report for July is expected to show the economy cranked out around 190,000 jobs during July.
Traders also wait for the Federal Reserve to give its latest appraisal of the U.S. economy and whether a change to the central bank’s stimulus strategy is warranted. Fed officials are meeting Tuesday and Wednesday in Washington.
The Fed has been buying $85 billion of financial assets a month, a move that has kept long-term borrowing rates low and fuelled a rally on stock markets. However, the Fed is widely expected to wind down the program later this year if the economy improves.
The price of oil fell to just above $103 a barrel on Tuesday as traders awaited the economic data, along with the latest reading on inventory figures.
The September crude contract on the New York Mercantile Exchange fell $1.47 to US$103.08 a barrel.
Metal prices also declined with the September copper contract on the Nymex down seven cents to US$3.04 a pound while the August gold contract fell $4.80 to US$1,324.80 an ounce.