TORONTO - The Canadian dollar closed sharply lower Tuesday as oil prices declined after a string of solid gains and the American currency strengthened against other currencies.
The loonie fell 0.69 of a cent to 79.53 cents US while traders also took in another round of weak Chinese data and kept an eye on the financial standoff between Greece and its eurozone creditors.
March oil in New York was down $2.84 to US$50.02 barrel after running ahead nine per cent since last Wednesday. Oil prices seem to have found support around the $50 a barrel level after pretty much going straight down since the end of November.
That is when OPEC refused to cut production in order to support prices that had already fallen sharply from highs of US$107 a barrel last June as markets cope with a huge supply/demand imbalance.
"The intraday range in oil prices is stabilizing and West Texas Intermediate (WTI) has attempted but so far failed to break above its 50-day moving average (of $53.01)," noted Camilla Sutton, chief FX strategist, managing director, Scotiabank Global Banking and Markets.
"A break and particularly a close above would be an important technical development for oil prices and the petrol currencies, like (the Canadian and Norwegian currencies)."
At the same time, the International Energy Agency says the price of crude is poised to recover soon but won't come close to the levels reached last summer.
The IEA says the current price recovery is unlike those of the past, because of the sharp increase in production by non-OPEC countries, especially the United States, as well as slowing demand in China.
The agency also said that unlike past cycles, the low oil price is not expected to greatly boost economic output because low demand was itself part of the reason for the market drop.
Elsewhere on commodity markets, March copper fell three cents to US$2.55 a pound. And April gold bullion fell $9.30 to US$1,232.20 an ounce.
Meanwhile, eurozone finance ministers will hold a special meeting Wednesday and EU leaders will gather for a summit Thursday to discuss the latest chapter in the Greek debt crisis.
Greece's leftist government wants a lightening in its bailout debt as well as an easing in required budgetary austerity measures but the European Union's executive says it is unlikely that a final agreement will be reached at meetings this week.
And in China, data showed that inflation in the world's second-largest economy fell below one per cent in January. Consumer prices rose 0.8 per cent, down from December's 1.5 per cent gain, which suggested weak consumer demand.