Loonie dips as US factory data strengthens greenback

The Canadian dollar fell back Wednesday morning as the U.S. dollar got a boost from encouraging economic data and traders tread cautiously ahead of a two-day summit of eurozone leaders in Brussels that starts Thursday.The loonie lost 0.16 of a cent to 97.50 cents US.Data from the U.S. Wednesday showed businesses placed more orders with U.S. factories for long-lasting manufactured goods in May. The increase suggests companies remain confident in the U.S. economy despite a weaker job market and a likely recession in Europe.The Commerce Department said that orders for durable goods rose 1.1 per cent in May after two months of declines.Meanwhile, stats from the National Association of Realtors showed Americans signed more contracts to buy previously occupied homes in May, matching the fastest pace in two years. The increase suggests home sales will rise this summer and the modest housing recovery will continue.The organization’s index of sales agreements increased to 101.1 last month from 95.5 in April. That matches March’s reading, the highest since April 2010, when a home-buying tax credit boosted sales.Focus is turning to the two-day summit of EU leaders starting Thursday in Brussels. No substantial progress in solving the eurozone’s debt crisis is expected at the meeting, which may lead to renewed pessimism about European demand for crude.Many experts say eurobonds are the answer to the currency zone’s problems as they would allow help lower indebted countries’ borrowing costs, easing the risk they may need a bailout. But Germany is reluctant to expose itself to new potential costs and is concerned that eurobonds may ease the pressure on countries like Greece and Spain to reform their economies.The Canadian dollar’s value relative to the U.S. currency “is caught in the same tight ranges that are confining most currency pairs leading into the summit,” said John Curran, senior vice-president at Canadian Forex.The August crude contract moved up 79 cents to US$80.15 a barrel on the New York Mercantile Exchange.Crude has fallen to near eight-month lows from US$106 a barrel less than two months ago amid signs economic growth and oil demand are slowing in the U.S., Europe and China.Curran notes that there’s a chance that crude oil inventories data due out later Wednesday may impact an already depressed oil price.“There is a strong chance that these peers are searching for something to trade off and will happily do so on any relevant (or perceived relevant) information. Having said that, USD/CAD does have an extremely high correlation to oil and a further gain in inventories will weigh on the CAD.”The August gold contract fell $1.90 to US$1,573, while the July copper contract was three cents higher at US$3.34.Traders were also digesting news that ratings agency DBRS confirmed the top long- and short-term AAA and R-1 (high) ratings for the Government of Canada, citing Canada’s “credible fiscal recovery plan” and “strong track record of outperformance.” read more