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Canadian dollar higher in wake of deal to prop up Spanish banking sector

Canadian dollars, or loonies, sit on American dollar bills on Sept. 20, 2007 in Montreal. The Canadian dollar has closed above parity with greenback for the first time since Sept. 20. THE CANADIAN PRESS/Paul Chiasson

TORONTO - The Canadian dollar was higher Monday with traders willing to take on more risk in after weekend developments showed a potential resolution for Spain's debt-laden banking sector, which is wallowing under the weight of billions of euros of toxic assets from a collapsed real estate market.

The commodity-sensitive loonie added 0.23 to 97.6 cents US as a weaker U.S. dollar helped push prices for oil and metals higher.

Eurozone finance ministers said Saturday they would make up to €100 billion in loans available to the Spanish government to prop up banks. Spain has yet to say how much of this money it will tap. It had been reluctant to seek help from the EU.

There was relief at progress in dealing with Spain's banking sector, but it was held in check since 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 material dragged lower by the European crisis."

Prices for oil and metals advanced with the July crude contract on the New York Mercantile Exchange ahead $1.10 to US$85.20 a barrel.

July copper was up seven cents to US$3.35 a pound while August bullion in New York gained $3.20 to US$1,594.60 an ounce.

With Spain taken care of for the moment, investors will now turn 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 common currency. If Greece leaves the euro, that will raise questions of whether other countries might, too.

News from © The Canadian Press, 2012
The Canadian Press

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