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Loonie advances as hopes for Europe brighten Add to ...

The Canadian dollar closed slightly higher Monday amid hopes that European Union finance ministers would take action soon to deal decisively with government debt crises in some of its member countries.

The loonie was up 0.11 of a cent to 97.25 cents (U.S.) amid stabilizing commodity prices.

The currency lost about 5 cents last week after expectations of slowing global economic conditions and a worsening European government debt crisis sent traders flocking to the safe haven status of U.S. Treasurys and prices for oil, copper and gold tanked.

The loonie advanced amid what “seems to be increasing consensus of what Europe needs – a larger aid package, the recapitalization of the weakest banks and a plan for an orderly Greek default,” observed Scotia Capital chief currency strategist Camilla Sutton.

“Whether European authorities can deliver is a different question, however at least there appears to be some form of consensus on what the solution is.”

European officials said over the weekend that Germany and other rich EU countries are pushing for a new strategy to tackle the debt crisis, which is threatening to take down the euro zone’s larger economies.

One proposal on the table is to ask banks and other private institutions that hold Greek bonds to take a far bigger loss on those holdings, slashing Athens’ debt. Many observers have said Greece will not manage to pay down its debt even after taking into account the reduction agreed in July.

The new strategy could also see the size of the continent’s €440-billion ($595.6-billion) bailout fund multiplied several times.

Oil prices rose with the November crude contract on the New York Mercantile Exchange up 39 cents to $80.24 after falling almost 10 per cent last week.

Copper was stable after falling 16 per cent last week with the December contract on the Nymex unchanged at $3.28 a pound.

Gold prices continued to head lower with the December contract down $45 to $1,594.80 after also losing almost 10 per cent last week.

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