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Canadian dollar down amid Greek bailout, fiscal cliff worries, lower commodities

A Canadian dollar, left, and a Euro are seen next to a series of U.S. dollars in this January 26, 2011 photo in Montreal. THE CANADIAN PRESS/Paul Chiasson
November 13, 2012 - 5:51 AM

TORONTO - The Canadian dollar was slightly lower Tuesday morning amid wrangling over dealing with more bailout money for Greece and worries about the approaching "fiscal cliff" in the United States.

The loonie was down 0.02 of a cent from Friday's close to 99.85 cents US. The loonie wasn't traded in Canada on Monday as banks were closed for the Remembrance Day holiday.

The looming end-of-year deadline over the expiration of Bush-era tax cuts and the automatic launch of massive spending cuts at the end of the year continued to cast a pall over markets. Economists reckon that such a scenario, the so-called fiscal cliff, would take a big chunk out of economic growth, likely pushing the U.S. back into recession and taking other economies down with it.

Traders also looked ahead to updated budget forecasts later in the day by finance minister Jim Flaherty.

"(The update) is likely to increase the focus on the risks that the U.S. fiscal cliff negotiations pose to the Canadian economy," observed Scotia Capital chief currency strategist Camilla Sutton.

Meanwhile, financial markets also focused on Greece after ministers from the 17 countries that use the euro failed to agree on how to put Greece’s bailout program back on track.

The EU and the International Monetary Fund disagree on the timeline for bringing Greece’s debts down to a manageable level. The European Commission, the EU’s executive arm, wants to give Greece until 2022 to reduce its debt to 120 per cent of gross domestic product. But the IMF wants to stick to the original deadline of 2020.

Giving Greece the extra time means the country would require about €33 billion in extra funding.

Finance ministers will meet Nov. 20 to decide where that extra funding will come from.

Meanwhile, Greece raised €4.06 billion from the sale of short-term treasury bills Tuesday. With the disbursement of a massive €31.5-billion instalment from Greece’s international bailout long delayed, Athens would have found it impossible to repay a €5-billion treasury bill maturing on Friday, the day on which Prime Minister Antonis Samaras has said Greece would run out of money.

Demand concerns and a generally higher American dollar drove commodity prices lower. A rising American currency pressures commodities because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are dollar-denominated.

December crude on the New York Mercantile Exchange declined 45 cents to US$85.12 a barrel.

December copper dipped two cents to US$3.45 a pound while December bullion lost $5.50 to US$1,725.40 an ounce.

News from © The Canadian Press, 2012
The Canadian Press

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