Canadian dollar up, greenback weakens on hopes for resolution to "fiscal cliff"

TORONTO – The Canadian dollar was up slightly Thursday amid lower commodity prices and hopes that the U.S. can avoid a looming “fiscal cliff.”

The loonie was up 0.04 of a cent to 100.88 cents US.

The fiscal cliff is a combination of expiring Bush-era tax cuts and automatic, across-the-board spending cuts due to take effect in January. The cliff is a result of prior failures of Congress and Obama to make a budget deal. But the worry is that the combination of big spending cuts and significant tax increases could push the U.S. economy back into recession.

President Barack Obama and House of Representatives Speaker John Boehner spoke Wednesday for the first time in days in a telephone discussion on the fiscal crisis.

Obama said a compromise was “not that tough” and could even be done quickly, raising the possibility that broader negotiations would soon resume between the White House and congressional leaders.

But Treasury Secretary Tim Geithner warned Wednesday after the close that the administration would “absolutely” let the tax increases and spending cuts take effect as scheduled unless Republicans give in to Obama’s demand to raise tax rates at upper income levels.

Commodities were lower as the January crude contract on the New York Mercantile Exchange extended losses from Wednesday that resulted from data showing a sharp run-up in U.S. gasoline inventories last week. Crude lost 28 cents to US$87.60 a barrel.

The March copper contract shed one cent to US$3.67 a pound after rising three cents Wednesday amid rising hopes for more economic stimulus in China, which is the world’s biggest consumer of the metal.

February gold bullion lost $3.20 to US$1,690.60 an ounce.

Traders also looked ahead to the release Friday of the Canadian November employment report. Economists are looking for the economy to have created around 7,500 jobs.

Overseas, the European Central Bank has left its key interest rate unchanged at a record low 0.75 per cent. The bank decided against further stimulus even though the economy of the 17 European Union countries that use the euro is in recession.