Loonie up amid higher commodities, positive U.S. data, traders eye Cyprus crisis

TORONTO – The Canadian dollar was higher Tuesday morning amid higher oil and metal prices while traders digested comments from a top eurozone official about whether the handling of the Cypriot financial crisis could serve as a model in future.

The loonie was up 0.08 of a cent to 98 cents US.

Markets whipsawed Monday, starting off positive on relief that Cyprus had secured a €10-billion bailout loan. But the country also had to come up with almost €6 billion on its own and it is doing this by slashing its oversized banking sector and inflicting hefty losses on large depositors in troubled banks.

Uncertainty about handling of future crises arose after Jeroen Dijsselbloem, who chairs the meetings of the finance ministers of the 17 European Union countries that use the euro, said the Cyprus bailout was a template.

He later attempted to retract his comments and described Cyprus as a “specific case with exceptional challenges.”

But he left the impression that those with bank deposits above the uninsured level of €100,000 may be tapped in any future bailout.

“The damage appears to have already been done and the market will be much more cautious with regard to investment in Eurozone banks based on the developments in Cyprus,” said George Davis, chief FIC technical analyst at RBC Dominion Securities.

All banks in Cyprus, with the exception of the Bank of Cyprus and Laiki, had been scheduled to reopen Tuesday after having been closed for 10 days. However, in a decision late Monday, authorities ordered all banks to remain shut until Thursday. No reason was given, but fears of a bank run are thought to have played a role in the decision.

Prices were mixed on commodity markets as the May crude contract on the New York Mercantile Exchange gained 76 cents to US$95.57 a barrel.

May copper gained three cents to US$3.47 a pound while April bullion declined $6.70 to US$1,597.80 an ounce.

In economic news, U.S. durable goods orders rose by 5.7 per cent in February, much higher than the 3.8 per cent reading that economists had expected.