Carney 2013 departure, uncertainty over Greek bailout funds lead to decline in loonie

TORONTO – The Canadian dollar was lower Monday amid a surprise announcement that Bank of Canada governor Mark Carney is leaving the central bank’s top job next year. He will take over the job as governor of the Bank of England July 1, 2013.

The loonie declined 0.24 of a cent to 100.57 cents US.

“It’s hard to see why this would affect monetary policy given that it’s pretty much on hold,” said CIBC World Markets chief economist Avery Shenfeld.

“But financial markets seem to be placing smaller odds now that the Bank of Canada will raise rates over the next year or so.”

The dollar had been lower earlier in the session amid a weak showing in commodity prices while traders looked for eurozone officials to come to a deal on getting the next instalment of bailout money to Greece.

Analysts suggested that the announcement had minimal effect on the currency because traders realize that Carney’s departure does not mean the Bank of Canada is likely to embark on any change in policy.

Meanwhile, Eurozone finance ministers met in Brussels Monday for a third time in recent weeks to get a deal together to release some €44 billion for Greece, which has been surviving on bailouts since 2010.

The eurozone ministers, Greece’s international creditors and the International Monetary Fund have been unable to reach an agreement.

Greece is unlikely to complete its program of budget cuts and reforms by 2014 and is likely to be given an additional two years to reach that goal.

But that extension will cost several billion euros more and the next instalment is being held up by disagreements over how to fund this.

Commodity prices were mixed with January crude on the New York Mercantile Exchange down 48 cents to US$87.80 a barrel.

The December copper contract on the Nymex was unchanged at US$3.54 a pound.

December bullion was down $2.10 to US$1,749.30 an ounce.

On the economic front, the major event of the week is the September reading on gross domestic product. Statistics Canada is expected to report on Friday that the economy grew by 0.1 per cent during the month. Such a reading would translate into the economy growing by 0.9 per cent at an annual rate during the third quarter.

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