Loonie slide limited by euro zone optimism

Thu Oct 13, 2011 4:59pm EDT
 
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By John McCrank

TORONTO (Reuters) - The Canadian dollar weakened against the U.S. dollar on Thursday as commodity prices fell on soft trade data out of China, but the currency clawed back most of its early losses on optimism that Europe was finally getting a handle on its debt problems.

The value of the currency ranged from C$1.0165, or 98.38 U.S. cents to C$1.0273, or 97.34 U.S. cents during the day, as the mood of investors moved from embracing risk to avoiding it, and back again.

Optimism over the state of the global economy took a hit early on in the day from weaker than forecast trade data out of China, which pointed to slowing world economic growth.

That took the steam out of commodity prices, which weighed on the resource-linked Canadian dollar. Canada is the top oil exporter to the United States and is a major producer of base metals and precious metals.

The price of U.S. crude oil, which up until Wednesday had risen 13 percent over the previous five sessions, fell $1.34 to settle at $84.23 a barrel.

Gold, silver, and copper prices also fell on the back of the Chinese data.

"There was some concern in the wake of the Chinese trade numbers, which showed softening in both export and import growth in September," said Doug Porter, deputy chief economist at BMO Capital Markets, who added that it should not be surprise that global growth had cooled slightly.

"So, while that initially rattled the market ... there is still some underlying optimism that the worst case scenario is being taken off the table for Europe."   Continued...