TORONTO - The Canadian dollar closed slightly lower Monday as the U.S. dollar continued to strengthen against a number of currencies including the loonie and the euro.
The Canadian currency was off 0.18 of a cent to 101.16 cents US after rising almost a full cent Friday in the wake of strong merchandise trade data.
The greenback has been stronger recently but analysts don't expect this trend to last.
"As the U.S. outlook has improved and early signs of inflation have crept back into valuations there has been upward pressure on U.S. (Treasury) yields and the dollar," said Scotia Capital chief currency strategist Camilla Sutton, adding that geopolitical concerns such as those emanating from Egypt recently have also added temporary support.
"The combination of a weak fiscal position, a relatively dovish Fed and ongoing stability in the eurozone region should all work towards medium-term downward pressure on the U.S. dollar."
The euro also fell as continental finance chiefs met to try to chart a way toward a comprehensive solution to the debt market turmoil, which government leaders have promised to come up with by March 11.
However, investors are increasingly worried that national interests will hinder a deal to boost the powers of the bailout fund and agree on new fiscal rules across the region.
The Canadian dollar moved lower as the March crude contract in New York declined 77 cents to US$84.81 a barrel. Crude fell about four per cent last week as fears eased that the political crisis in Egypt could disrupt crude supplies. President Hosni Mubarak resigned Friday, following 18 days of anti-government riots that brought millions of protesters to the streets.
Copper prices moved further into record territory. The March copper contract on the New York Mercantile Exchange ran up nine cents to US$4.63 a pound. High demand for the metal used in construction and electrical appliances has sent copper surging almost 40 per cent since the beginning of 2010.
The strong showing in copper prices came amid data showing that China's exports surged 37.7 per cent in January, which was more than double December's rate, in a sign of rebounding global demand. Import growth jumped 53.5 per cent.
Gold prices were also higher with the April bullion contract on the Nymex up $4.70 to US$1,365.10 an ounce.
Traders will be looking to the latest reading of inflation at the end of the week.
Statistics Canada is expected to report that the consumer price index rose by 0.2 per cent in January, driven largely by rising food and energy prices.
Economists say the small gain would push the annualized rate down to 2.3 per cent, from 2.4 per cent the previous month.
