TORONTO - The Canadian dollar closed lower Monday as oil and gold prices retreated and the U.S. dollar strengthened following an agreement between Iran and world powers over that country's nuclear program.
The loonie was down 0.22 of a cent to 94.8 cents US.
The agreement, reached over the weekend, will allow Iran to keep the central elements of its uranium program but also calls for Iran to stop its enrichment at a level lower than what is needed for nuclear arms.
Oil prices fell following the announcement of the Iranian deal, even though it does not loosen sanctions on Iran’s oil exports. The January crude contract on the New York Mercantile Exchange lost 75 cents to US$94.09 a barrel.
The deal raises the possibility that a more comprehensive agreement would eventually allow Iran to restore oil production to pre-sanctions levels. That could add one million barrels per day of oil to world markets, which would be enough to meet the entire global growth in demand for 2014 projected by the International Energy Agency.
Elsewhere on the commodity markets, December copper was up one cent at US$3.22 a pound while increased risk appetite pushed December bullion down $2.90 to US$1,241.20 an ounce.
Meanwhile, traders looked to the end of the week when Statistics Canada issues its gross domestic product readings for September and the third quarter. That may help the Canadian dollar as the data is expected to show the Canadian economy in a better than expected performance.
The consensus calls for growth to come in at an annualized pace of 2.4 per cent — which would be 0.8 of a percentage point higher than what the Bank of Canada has forecast. GDP performance was helped along by October retail sales data that was released on Friday. Sales rose one per cent, much higher than the 0.3 per cent gain that economists had expected.
The decline in the loonie Monday follows a slide of almost three-quarters of a cent last week with the greenback gaining ground after minutes from the Fed's latest meeting suggested the U.S. central bank will start reducing its US$85 billion of monthly bond purchases in coming months.
Those purchases have kept long-term rates low and encouraged investors to pile into the equity markets.