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The Canadian Press - ONLINE EDITION

Canadian dollar, commodities advance, Greek reaches agreement to secure bailout

By: Malcolm Morrison, The Canadian Press

Posted: 02/9/2012 8:03 AM | Comments: 0 (including replies) | Last Modified: 02/9/2012 3:36 PM

Canadian dollars, or loonies are shown with US dollars on April 6, 2010. THE CANADIAN PRESS/Ryan Remiorz

TORONTO - The Canadian dollar closed higher Thursday while commodity prices ran ahead amid news that the Greece's coalition government had struck a deal on conditions that will allow it to secure a crucial, second financial bailout.

The currency gained 0.05 of a cent to 100.44 cents US.

Greece needs to get its hands on a €130-billion bailout in order to meet a key bond redemption on March 20. Failure to do so would result in a default which would send shock waves through the financial system.

But in order to get the money, the government had to agree on yet another round of tough austerity measures.

Commodity prices spiked higher on word of the Greek agreement, with the March crude contract up $1.13 to US$99.84 a barrel.

The March copper contract in New York added seven cents to US$3.97 a pound.

Prices had earlier moved lower amid data showing January inflation figures for China came in well above expectations.

Consumer prices in the world's second-largest economy rose by an unexpectedly strong 4.5 per cent annual rate, up from December's 4.1 per cent. Food prices jumped 10.5 per cent, accelerating from the previous month's 9.1 per cent rate.

The price spike could complicate the government's efforts to revive growth that slowed to a two-and-a-half-year low of 8.9 per cent in the final quarter of 2011.

Markets have been hoping that inflation would move lower, allowing Chinese leaders to loosen lending requirements and encourage growth.

China is the world's biggest consumer of copper, which has surged almost 14 per cent so far this year on hopes of higher demand for the metal that is viewed as an economic bellwether because it is used in so many businesses.

Bullion prices also advanced with the April contract ahead $9.90 to US$1,741.20 an ounce.

Meanwhile, the European Central Bank left its benchmark interest rate unchanged at a record low one per cent on Thursday while it waits to see whether the economy needs more help. The 17 countries that use the euro are struggling with a debt crisis and likely recession.

The Bank of England also left rates unchanged but announced it would buy 50 billion pounds more in bonds to stimulate the lagging British economy. Output contracted 0.2 per cent in the fourth quarter and another quarter of shrinkage would official mean recession.

Two rate cuts by the ECB in November and December, and a massive offer of cheap credit to banks, have been given credit for helping steady financial markets and ease access to credit by indebted governments.

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