The Canadian dollar closed higher Tuesday amid greater oil prices while traders digested comments from a top euro zone official about whether the handling of the Cypriot financial crisis could serve as a model in the future. he loonie was up 0.47 of a cent to 98.39 cents (U.S.).
There had been initial relief Monday after Cyprus secured a €10-billion ($13-billion Canadian) bailout loan. The country also had to come up with almost €6-billion on its own and is doing it by slashing its oversized banking sector and inflicting hefty losses on large depositors in troubled banks.
But that relief turned to uncertainty after Jeroen Dijsselbloem, who chairs the meetings of the finance ministers of the 17 European Union countries that use the euro, said the Cyprus bailout was a template.
He later attempted to retract his comments and described Cyprus as a “specific case with exceptional challenges.”
But he left the impression that those with bank deposits above the uninsured level of €100,000 may be tapped in any future bailout.
“The damage appears to have already been done and the market will be much more cautious with regard to investment in euro zone banks based on the developments in Cyprus,” said George Davis at RBC Dominion Securities.
All banks in Cyprus, with the exception of the Bank of Cyprus and Laiki, had been scheduled to reopen Tuesday after having been closed for 10 days. However, in a decision late Monday, authorities ordered all banks to remain shut until Thursday. No reason was given, but fears of a bank run are thought to have played a role in the decision.
Prices were mixed on commodity markets as the May crude contract on the New York Mercantile Exchange gained $1.53 to $96.34 (U.S.) a barrel.
May copper gave up early gains to close unchanged at $3.44 a pound while April bullion declined $8.80 to $1,595.70 an ounce.
In economic news, U.S. durable goods orders rose 5.7 per cent in February, much higher than the 3.8 per cent reading that economists had expected.
Also, the U.S. Case/Schiller home price index rose by slightly more than 1 per cent in January, higher than the 0.6 per cent gain that had been expected.