Canadian dollar lower amid strong demand for Spanish debt, falling oil prices

TORONTO – The Canadian dollar closed lower Thursday amid mixed commodity prices and relief on financial markets over the success of a key Spanish bond auction.

The loonie lost 0.4 of a cent to 100.48 cents US. But the currency is still up almost half of a cent from Monday’s close, a day before the Bank of Canada hinted that higher rates could be on the way while leaving the current rate unchanged at one per cent.

The yield on 10-year Spanish bonds at Thursday’s auction was 5.7 per cent, up from 5.3 per cent at the last auction on April 4.

But traders were encouraged by the fact that demand was more than double the amount sold, which suggests Spain will continue to be able to easily tap financial markets to fund itself. That is crucial for the rest of Europe, as Spain would likely be too big to bail out.

Worries about Spain have, in recent weeks, seen a flare-up in Europe’s debt crisis. But analysts suggest those concerns about the heavily indebted country will continue to weigh on market sentiment.

Oil prices dipped after falling sharply Wednesday in the wake of data showing a much bigger than expected rise in U.S. crude inventories last week, suggesting flagging demand. The May crude contract on the New York Mercantile Exchange was off eight cents to US$102.59 a barrel.

Copper prices were unchanged at US$3.63 a pound.

A slowing Chinese economy has helped push the price of the metal down almost eight per cent this month. China is the world’s biggest consumer of the metal, viewed as an economic bellwether as it is used in a wide variety of industries.

Gold bullion gained $1.80 to US$1,641.40 an ounce.