Dollar drops, commodity prices retreat
By Canadian Press
By Canadian Press
Jan. 23, 2012 – The Canadian dollar closed lower as data showed a sharp drop in inflation during December while prices for oil and metals backed off. The loonie was down 0.17 of a cent to 98.7 cents U.S. after inflation fell 0.6 per cent from November to an annualized rate of just 2.3 per cent.
Analysts had expected prices to cool in December due to Christmas season
sales, but not by this much. The consensus was for a 0.4 per cent
Analysts noted that a major contributor to the decline was a 2.3 per
cent drop in motor vehicle prices as manufacturers offered discounts on
2012 models. There were also sizable drops in clothing, home
entertainment equipment and household furnishings. Lower commodity
prices also weighed on the dollar.
Oil prices continued to lose ground as signs of economic improvement in
the U.S. and Europe were tempered by a rise in gasoline stocks, which
suggests weaker demand for crude. The February crude contract on the New
York Mercantile Exchange
dropped $1.93 to US$98.46 a barrel.
Metal prices also backed away with March copper down five cents to
US$3.75 a pound, almost reversing the five-cent gain on Jan. 19. But
prices for the metal, viewed as an economic bellwether because it is
used in so many businesses, have jumped about three per cent this week
after Chinese growth for the fourth quarter came in better than
expected. China is the world's biggest consumer of copper. But prices
gave up some ground Friday after HSBC's Flash China Manufacturing
Purchasing Managers Index reading for January came in at 48.8. That is
up slightly on the final reading from December of 48.7 but a reading
below 50 still signals contraction. And the February gold contract on
the Nymex gained $9.50 to US$1,664 an ounce.
Traders also kept an eye on debt-reduction talks between Greece and its
private creditors that could determine whether Europe's debt crisis
flares up again. Prime Minister Lucas Papademos met for a third day with
negotiators from the Institute of International Finance, which
represents the private creditors who are being asked to take a loss on
their bondholdings to lighten Greece's debt load by 100 billion Euros.
An agreement is needed if Greece is to get the next batch of bailout
cash that would prevent a devastating debt default. Greece does not have
enough money to cover a 14.5 billion Euro bond repayment in March.