Loonie moves higher while global economic outlook softens, commodities mixed

TORONTO – The Canadian dollar was higher on Tuesday on a mixed direction for commodities prices and renewed questions about global economic weakness.

The loonie ended the day up 0.08 to 102.61 cents U.S.

The currency has been testing 13-month highs in recent sessions, though pressure from the U.S. dollar could slow those gains.

“Correlations between (the Canadian dollar) and other assets are beginning to weaken,” said Camilla Sutton, chief currency strategist at Scotiabank in a note.

“In mid-August (it) was strongly correlated with almost every asset class.”

“We continue to expect USD/CAD to enter a short period of rest trading between 96 cents and 99 cents,” she added.

In commodities, the October crude oil contract ended the session off $1.33 to US$95.29 a barrel.

December copper was down less than a cent at US$3.79 a pound, while December gold bullion rose 60 cents to US$1,771.20 an ounce.

Spain’s acceptance of a financial aid package appears to have been delayed, adding some concern to the outlook for the global economy.

The country’s markets have improved in recent weeks on expectations that the government will get some form of rescue loan from the 16 other eurozone countries. But, Madrid has not made any formal request yet, likely wary of the policy conditions that would come attached.

The delay pushed the country’s bond yields sharply higher on Monday, suggesting an increase in investor concern about the government’s finances.

The yields eased back somewhat on Tuesday after a bond auction was well-received. The sale of 12- and 18-month debt saw strong demand and resulted in lower interest rates than in the previous such auctions.

Meanwhile, FedEx added to the tensions after saying that the global economy was worsening and cutting its forecast.