Canadian "loonie" dollar coins.Larry MacDougal/For The Globe and Mail
The Canadian dollar closed lower Tuesday as the greenback rallied in the wake of an agreement to raise the U.S. debt ceiling.
Falling commodity prices also helped push the loonie down 0.52 of a cent to $1.0414 (U.S.).
The greenback initially gained strength after the U.S. House of Representatives comprehensively passed a bill increasing the debt ceiling Monday evening. The U.S. Senate also passed the legislation to raise the debt ceiling and avert a potentially catastrophic default Tuesday afternoon.
Commodities were under pressure following data released Monday showing the U.S. manufacturing sector slowed to within a whisker of slipping back into contraction. The Institute for Supply Management's index on the sector fell to 50.9 during July from 55.3 the previous month, raising worries that the economic weakness seen in the first half of the year was not just temporary.
The data was particularly bad news coming before the release Friday of the U.S. non-farm payrolls report. Job creation hopes were already muted before the ISM report with economists expecting the American economy cranked out about 90,000 jobs during July.
Traders also looked to the release of Canadian jobs data on Friday. Economists expect the economy created about 20,000 jobs during July.
There was another troubling sign for the American economy Tuesday as a report showed that Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months.
The U.S. Commerce Department said consumer spending dropped 0.2 per cent in June while incomes rose 0.1 per cent. It was the weakest growth in income since September, reflecting anaemic hiring this spring.
Oil prices were lower for a third session on demand worries as the September contract on the New York Mercantile Exchange lost $1.10 to $93.79 (U.S.) a barrel.
Metal prices drifted lower with copper down two cents at $4.39 a pound. The ISM report pushed the metal down seven cents Monday, despite other data showing a better than expected Chinese Purchasing Managers report for July.
Nervous investors continued to push gold further into record territory, with bullion up $22.80 to $1,644.50 an ounce.