TORONTO - The Canadian dollar closed higher Tuesday against a backdrop of generally lower commodity prices and rising concern about the troubled Spanish banking sector, which is looking for government help.
The currency gained 0.08 of a cent to 97.76 cents US.
There was serious fallout after Spain’s fourth-largest lender, Bankia, said it needs €19 billion in state aid to shore itself up.
Ratings agency Egan-Jones downgraded Spain’s credit rating to BB-minus from B.
And the interest rate, or yield, on Spanish 10-year-bonds rose Tuesday to 6.5 per cent in a sign that investors were turning away from Spanish debt. Meanwhile, the spread between Spanish bonds and safe haven German bunds remained at an alarming 5.14 percentage points.
Investors fear that the Spanish government, which is already under pressure to lower its debt at a time of recession and record-high unemployment, will be overwhelmed by the cost of saving the country’s banking sector.
Commodity prices were mixed amid rumours that China will relax monetary policy and announce fiscal stimulus measures to offset slowing economic growth.
China's huge appetite for oil and metals has been a primary driver for higher commodity prices and for resource stocks. However, they have taken a beating over the last couple of months on worries the global economic recovery is losing momentum.
The July crude contract on the New York Mercantile Exchange gave up early gains to move down a dime to US$90.76 a barrel.
The July copper contract closed off the best levels of the day, giving up a six cent advance to rise a penny to US$3.46 a pound. The June gold bullion contract in New York closed $20.20 lower at US$1,548.70 an ounce.
On the economic front, traders balanced U.S. data showing a steadily recovering housing sector with a poorer than expected reading on consumer confidence.
The Standard & Poor’s/Case-Shiller home price index showed that home prices rose in March from February in most major U.S. cities for the first time in seven months. Prices increased in 12 of the 20 cities it tracks.
However, the Conference Board said its Consumer Confidence Index came in at 64.9 for May, down from a revised 68.7 in April. Economists had been expecting a reading of 70.
