The Canadian dollar closed lower against the U.S. currency Monday as oil prices remained volatile and nervous investors looked for safety in gold.
The loonie was off 0.12 cents (U.S.) at 102.79 cents.
Oil prices continued to advance as fighting between supporters and opponents of Libyan leader Moammar Gadhafi intensified over the weekend, raising fears that the fighting won't be over any time soon.
There has been a great deal of nervousness that the unrest in the biggest oil producer in Africa could spread to other oil-rich countries in the Mideast, particularly Saudi Arabia, sending prices up substantially from just under $90 on Feb. 18.
The April crude contract on the New York Mercantile Exchange closed up $1.02 at $105.44 a barrel. The dollar had gone as high as 103.09 cents earlier in the morning as oil reached $106.95 a barrel.
"Oil is an important driver for the Canadian dollar," noted Scotia Capital chief currency strategist Camilla Sutton.
"Oil currently holds the tightest correlation with the currency, as interest rate spreads, equities ... [the euro, Australian dollar]and risk aversion are all important, but still lagging oil."
Unrest in the Mideast sent the April gold contract on the Nymex up $5.90 to $1,434.50 an ounce.
Copper in New York fell 16 cents at $4.33 a pound.
The European debt crisis was also in focus Monday following a warning from Moody's Investor Services that Greece may have no option but to restructure its debts in the next couple of years despite the country's €110-billion ($154-billion) bailout last May.
The agency slashed Greece's rating by three notches to B1 from Ba1 and warned it may reduce it again if the government's commitment to austerity wanes or international creditors become less willing to support the country.
Greece's bond yields rose on the news, with the benchmark 10-year up 0.07 percentage points at 12.3 per cent - nine percentage points more than Germany's even though they share the same currency.
The downgrade "was taken largely in stride by the market with Greece already being on negative watch at the agency," said a commentary from RBC Nesbitt Burns.
"The magnitude of the downgrade is surprising, however, and is a reminder that peripheral debt issues may be on the back-burner, but they have not gone away."Report Typo/Error
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