Loonie lower amid Carney 2013 departure, uncertainty over Greek bailout funds

TORONTO – The Canadian dollar closed lower Monday after a surprise announcement that Bank of Canada governor Mark Carney is leaving the central bank’s top job next year to take over the top job at the Bank of England.

The loonie declined 0.19 of a cent to 100.62 cents US on the realization that Carney’s departure doesn’t change the near-term outlook for interest rates.

During an appearance before the Commons Finance Committee Oct. 31, Carney suggested that interest rates will rise before the end of 2014. Its key rate has been at one per cent for a little over two years.

“Overall, the market reaction thus far to Carney’s surprise announcement has been fairly muted, but this could change over time, of course, depending on who is eventually elected to governor,” observed Capital Economics Canada economist David Madani.

“Whoever this turns out to be, though, they will face new and big challenges, namely a struggling global economy and a potentially severe housing market correction.”

Carney will continue to be at the helm of the Canadian central bank until June 1, 2013.

The dollar had started the session lower amid a weak showing in commodity prices while traders looked for eurozone officials to come to a deal on getting the next instalment of bailout money to Greece.

Meanwhile, eurozone finance ministers met in Brussels Monday for a third time in recent weeks to get a deal together to release some €44 billion for Greece, which has been surviving on bailouts since 2010.

The eurozone ministers, Greece’s international creditors and the International Monetary Fund have been unable to reach an agreement.

Greece is unlikely to complete its program of budget cuts and reforms by 2014 and is likely to be given an additional two years to reach that goal.

But that extension will cost several billion euros more and the next instalment is being held up by disagreements over how to fund this.

Commodity prices were mixed with January crude on the New York Mercantile Exchange down 48 cents to US$87.80 a barrel.

The December copper contract on the Nymex was unchanged at US$3.54 a pound.

December bullion was down $2.10 to US$1,749.30 an ounce.

On the economic front, the major event of the week is the September reading on gross domestic product. Statistics Canada is expected to report on Friday that the economy grew by 0.1 per cent during the month. Such a reading would translate into the economy growing by 0.9 per cent at an annual rate during the third quarter.