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Loonie down amid Greek debt worries

TORONTO - The Canadian dollar closed lower Tuesday despite a stronger than expected reading on retail sales as uncertainty over a deal between Greece and its creditors weighed on markets.

TORONTO - The Canadian dollar closed lower Tuesday despite a stronger than expected reading on retail sales as uncertainty over a deal between Greece and its creditors weighed on markets.

The loonie was down 0.25 of a cent to 99.02 cents US as a stronger U.S. dollar also put pressure on commodity prices.

Statistics Canada reported that retail sales rose a better than expected 0.3 per cent to $38.7 billion in November.

It was the fourth consecutive monthly retail sales increase and the results beat economists' expectations for a 0.2 per cent rise.

Retail sales in November were up in half of the provinces, rising in Quebec and the four western provinces for the fourth month in a row. But sales declined in all of the Atlantic provinces and Ontario.

Traders turned cautious after the finance ministers of the countries that use the euro announced that Greece would pay less than four per cent interest on the new bonds that creditors will get in a swap meant to cut Greece’s debt by about €100 billion.

That amount is less than the creditors are so far willing to accept.

A deal with creditors is crucial to Greek and the eurozone stability since it's clear there’s no way Athens can ever pay back all that it owes. Banks that hold Greek debt have already been asked to take a 50 per cent loss on those investments — and some think even that writedown isn't big enough.

Time is running out as Greece has several billions of euros of debt coming due in March.

Uncertainty over a Greek debt deal and the higher greenback also depressed commodity markets, with the March crude oil contract on the New York Mercantile Exchange losing 63 cents to US$98.95 a barrel.

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

Oil prices climbed by more than US$1 a barrel on Monday on concerns that Iran could block shipments of crude from the Persian Gulf in the wake of the European Union’s decision to embargo imports of Iranian oil.

March copper shook off early losses and closed up a penny at US$3.81 a pound while gold prices fell with the February contract in New York down $13.80 to US$1,664.50 an ounce.

Traders also took in a glum report from the International Monetary Fund which said recession in Europe will slow the global economy this year.

The IMF forecasts global growth of 3.25 per cent this year, slower than the four per cent pace it projected in September, which doesn't bode well for earnings and revenue growth.

 
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