Canadian dollar boosted by Berlusconi exit plan

Tue Nov 8, 2011 4:36pm EST
 
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By Jennifer Kwan

TORONTO (Reuters) - The Canadian dollar edged higher against the U.S. currency on Tuesday, taking its cue from rising global markets after Italy's Prime Minister Silvio Berlusconi confirmed he will resign.

Berlusconi said he would quit after suffering a humiliating setback in parliament that showed a party revolt had stripped him of a majority.

The news sent global equities, commodities and the euro higher as Berlusconi's exit could ease the passage of unpopular austerity measures needed to reduce debt and lower Italian government bond yields.

"There seems to be some relief about the European credit situation now that it looks like Berlusconi will step down," said Sal Guatieri, senior economist at BMO Capital Market.

"There's a sense that Italy might push through more aggressive budget austerity measures."

Investors have been concerned that Italy, the euro zone's third largest economy, could be facing a crisis similar to the one that forced Greece to seek a bailout.

The Berlusconi-induced bounce overshadowed news that Canada pushed back its promised date to balance the budget by a year as a global economic slowdown takes its toll on a domestic economy that has outperformed most rivals.

The Canadian government and the Bank of Canada also agreed to renew without change the central bank's five-year mandate to target a 2 percent overall inflation rate.   Continued...