The Canadian dollar racked up a solid gain Tuesday morning, reflecting a sharp runup in oil and copper prices Monday while domestic markets were closed for Victoria Day.
The commodity-sensitive loonie gained 0.41 of a cent to 98.37 cents US.
Commodity prices were mixed after oil and copper advanced Monday after closing at multi-month lows last week on demand worries and a strengthening U.S. dollar. Traders have avoided riskier investments such as commodities, equities and resource-based currencies such as the Canadian dollar and bought into the safe haven status of U.S. Treasuries.
A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.
The June crude contract on the New York Mercantile Exchange was off 12 cents to US$92.45 a barrel after gaining $1.09 Monday. Copper traded at US$3.50 a pound, holding on to Monday’s three-cent gain.
June gold was off $8.20 to US$1,580.50 an ounce after dipping $3.20.
The Canadian currency has swooned about three US cents during May, largely because of market nervousness over the future of the eurozone.
Uncertainty has persuaded traders to pile into U.S. Treasuries and avoid riskier assets such as commodities (which have fallen to multi-month lows) and resource-based currencies such as the Canadian dollar.
The worry is that Greek political parties dead set against the austerity programs that have made crucial bailouts possible will be in an influential position after the next election June 17. A repudiation of those agreements would likely trigger a default and Greece would have to exit the eurozone.
Meanwhile, traders also digested a dire warning from the Organization for Economic Cooperation and Development that the 17-country eurozone risks falling into a “severe recession.” And the OECD, which comprises the world’s most developed economies, called on governments and Europe’s central bank to act quickly to stop the slowdown spilling over into the global economy.
OECD Chief Economist Pier Carlo Padoan called on eurozone leaders to adopt a “policy compact” to promote growth even while reducing deficits.
So-called eurobonds — debt issued jointly by countries in the currency bloc — could be used to recapitalize banks, Padoan said.
He also reiterated his call of six months ago for the ECB to do more to stem Europe’s crisis.
Traders also focused on a summit of European leaders that’s expected to be dominated by calls to boost economic growth across the continent.
On Wednesday, the leaders of the 27 European Union countries will hold an informal meeting in Brussels. The summit is expected to focus on ways to kick start the region’s faltering economy.