TORONTO – The Canadian dollar closed higher Thursday amid rising commodity prices while traders appeared to take in stride a downgrade of Spain’s debt.
The loonie also benefited from a stronger than expected trade report, rising 0.21 of a cent to 102.18 cents US.
Statistics Canada says both imports and exports fell in August, narrowing the trade deficit with the world to $1.3 billion from $2.5 billion in July. Economists had expected a deficit of $1.85 billion.
Standard & Poor’s cut its rating on Spain’s debt by two notches to BBB-minus late Wednesday, leaving the country on the verge of junk status, or non-investment grade.
The Spanish government has so far refused to tap a new European Central Bank bond-buying facility that has been largely designed to keep a lid on the country’s borrowing rates. But market reaction was muted as some analysts think the downgrade will help push the government to finally request the help.
Also, “S&P had previously downgraded Spain in late April 2012 and had warned at the time that the risk of further downgrades were clear,” observed Scotia Capital chief currency strategist Camilla Sutton.
Meanwhile, the commodity sensitive loonie benefited from rising prices for oil and metals.
The November crude contract continued to find support from worries that the Syrian conflict is escalating. Traders fear the civil war in Syria could grow into a wider regional conflict that could threaten oil supplies from Middle East producers. The Middle East and North Africa account for about a third of global oil production. Oil was up 82 cents to US$92.07 a barrel.
December copper rose three cents to US$3.75 a pound while December bullion edged up $5.50 to US$1,770.60 an ounce.