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The Globe and Mail

Loonie ends lower as greenback gains on euro zone concerns

Demonstrators with mock-up money bags to protest against the visit of Spanish Prime Minister Mariano Rajoy, in Berlin, Monday Feb. 4, 2013. Some of the banners demand Rajoy's resignation because of the party-linked corruption allegations in Spain .

Michael Kappeler/AP

The Canadian dollar closed lower against the U.S. dollar Monday as the greenback strengthened amid another round of worries centred on the euro zone.The loonie fell 0.13 of a cent to 100.14 cents (U.S.).

"Politics have been an important driver today as corruption allegations against Spanish Prime Minister [Mariano] Rajoy weigh heavily on the political outlook and drive Spanish yields higher," said Scotia Capital chief currency strategist Camilla Sutton.

"In addition, the looming election in Italy continues to make headlines."

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The coming election is proving to be a closer race than many people had thought and there are worries that the next Italian government might dilute the financial reforms put in place by the administration of Mario Monti.

The situation in Spain is also generating concern as the government is increasingly embroiled in a corruption scandal. On the weekend, Mr. Rajoy denied allegations that he and members of his party accepted secret payments. The developments sent Spanish yields higher on two- and 10-year bonds by 0.20 percentage points

The European Central Bank is meeting this week as well. Although no change in policy is expected, traders will look to see what bank president Mario Draghi has to say about the strength of the euro.

The euro's advance in recent weeks is a sign of optimism over the currency's future following a seeming easing in financial market worries over Europe's debt crisis. But it potentially makes life more difficult for the euro zone's exporters and that could delay a recovery from recession.

Commodity prices closed off the worst levels of the session as the March crude contract on the New York Mercantile Exchange lost $1.60 to $96.17 (U.S.) a barrel.

April gold bullion gained $5.80 to $1,676.40 an ounce while March copper slipped 2 cents to $3.77 a pound.

On the economic front, data showed U.S. factory orders for December coming in below expectations.

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Factory orders increased 1.8 per cent from November, lower than the 2.5 per cent reading that economists had expected. And November factory orders were revised down to show a 0.3 per cent decline.

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