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The Canadian Press - ONLINE EDITION

Loonie lower, traders await outcome of talks aimed at securing Greek debt deal

By: Malcolm Morrison, The Canadian Press

Posted: 02/8/2012 7:40 AM | Comments: 0 (including replies) | Last Modified: 02/8/2012 3:19 PM

A Canadian dollar coin, or loonie, and an American dollar sit in front of a scale in Quebec City, in this April 7, 2010 photo. THE CANADIAN PRESS/Jacques Boissinot

TORONTO - The Canadian dollar closed lower Wednesday while cautious traders eyed talks aimed at securing a crucial, second bailout for Greece.

The currency was down 0.13 of a cent to 100.39 cents US.

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Greece needs to get its hands on another €130 billion. Otherwise, it will not have enough money to pay off a big bond redemption on March 20.

A default on the country's massive debts would create havoc in the global financial system. However, in order to get the money, the country’s coalition leaders must agree on a new slate of tough austerity measures.

On Wednesday, the leaders held talks with Greece's prime minister to review a draft deal on steep cutbacks demanded by creditors.

Also, a meeting of eurozone finance ministers will go ahead in Brussels on Thursday evening to discuss the second massive bailout for Greece — a key indication that a deal is close.

Greece has already accepted a demand to fire up to 15,000 workers in the public sector 2012, but is under pressure to impose deeper cuts, including reductions in pension payments and the minimum wage.

Hopes for a resolution to the Greece issue were raised after The Wall Street Journal said that the European Central Bank is prepared to contribute to lightening Greece's debt burden. According to the report, the ECB would essentially give up on profits that it stands to gain on its Greek bond holdings by handing them over to the European bailout fund, which then will sell them back to Greece. Athens would gain billions in the deal.

However, Dow Jones Newswires later reported that the ECB may hold off on helping Greece until after other key elements of its ongoing debt negotiations fall into place.

The dollar was also pressured by commodity prices which lost early momentum.

The March crude contract on the New York Mercantile Exchange rose 30 cents to US$98.71 after the U.S. Energy Information Administration reported a small rise in crude inventories last week. Prices had earlier moved as high as US$100.09 after the American Petroleum Institute said Tuesday that crude inventories fell by 4.5 million barrels last week.

March copper in New York up three cents to US$3.89 a pound amid news that China’s government will increase support for building affordable houses. China is the world's biggest consumer of the metal, which is viewed as a bellwether for the global economy as it is used in so many businesses.

The April bullion contract faded $17.10 to US$1,731.30 an ounce.

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