Canadian dollar lower, traders avoid risk on growing fiscal cliff worries

TORONTO – The Canadian dollar closed lower Friday amid doubts about whether the U.S. can avoid going over the so-called fiscal cliff in a matter of days, a development that could put the United States on course for another recession.

The loonie was down 0.16 of a cent at 100.35 cents US as traders avoided riskier assets, including resource-based currencies and commodities, and bought into the perceived safe haven of the American dollar.

The fiscal cliff scenario involves the automatic imposition of huge spending cuts and significant tax increases due to take effect at the beginning of the year. With the U.S. recovery already weak, economists worry that the American and other economies could be dragged down if the measures are allowed to persist.

Traders had looked forward to a mid-afternoon meeting at the White House for last-minute talks. But there was disappointment on markets amid reports that Obama did not present a new budget offer to congressional leaders.

Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

Commodities were lower with February crude on the New York Mercantile Exchange down seven cents to US$90.80 a barrel.

March copper was a cent lower at US$3.59 a pound while February gold declined $7.80 to US$1,655.90 an ounce.