Canadian dollar higher amid rising eurozone concerns, falling commodities

TORONTO – The Canadian dollar headed slightly higher Monday as commodities backed off and traders again focused on Europe.

The loonie rose 0.06 of acent to 100.33 cents US.

“Politics have been an important driver today as corruption allegations against Spanish Prime Minister (Mariano) Rajoy weigh heavily on the political outlook and drive Spanish yields higher,” said Scotia Capital chief currency strategist Camilla Sutton.

“In addition, the looming election in Italy continues to make headlines.”

The upcoming election is proving to be a closer race than many people had thought and there are worries that the next Italian government could dilute the financial reforms put in place by the administration of Mario Monti.

Spain is also generating concern as the government is increasingly embroiled in a corruption scandal. On the weekend, Rajoy denied allegations that he and members of his party accepted secret payments. The developments sent Spanish yields higher on two- and 10-year bonds by 20 basis points

The European Central Bank is meeting this week as well. Though no change in policy is expected, traders will look to see what bank president Mario Draghi has to say about the strength of the euro.

The euro’s advance in recent weeks is a sign of optimism over the currency’s future following a seeming easing in financial market worries over Europe’s debt crisis. But it potentially makes life more difficult for the eurozone’s exporters and that could delay a recovery from recession.

Commodity prices headed lower following sharp gains on Friday.

The March crude contract on the New York Mercantile Exchange lost $1.25 to US$96.52 a barrel.

April gold bullion fell $5.50 to US$1,663.90 an ounce while March copper slipped one cent to US$3.77 a pound.