Loonie dips amid higher commodity prices worries about Spanish banks

The Canadian dollar was lower Tuesday against a background of higher commodity prices and rising concern about the troubled Spanish banking sector, which is looking for government help.The currency dipped 0.06 of a cent to 97.62 cents US.Commodity prices gained ground amid rumours that China will relax monetary policy and announce fiscal stimulus measures to offset slowing economic growth.China’s huge appetite for oil and metals has been a primary driver for higher commodity prices and for resource stocks. However, they have taken a beating over the last couple of months on worries the global economic recovery is losing momentum.The July crude contract on the New York Mercantile Exchange was up 51 cents to US$91.37 a barrel.The July copper contract added two cents to US$3.47 a pound while the June bullion contract in New York gave up early gains to move $8.80 lower to US$1,560.10 an ounce.Meanwhile, traders reacted to news that Spain’s fourth-largest lender needs €19 billion in state aid to shore itself up by demanding higher interest rates to buy the country’s debt.The interest rate, or yield, on Spanish 10-year-bonds rose Tuesday to 6.5 per cent in a sign that investors were turning away from Spanish debt. Meanwhile, the spread between Spanish bonds and safe haven German bunds remained at an alarming 5.14 percentage points.Investors fear that the Spanish government, which is already under pressure to lower its debt at a time of recession and record-high unemployment, will be overwhelmed by the cost of saving the country’s banking sector.On the economic front, traders balanced U.S. data showing a steadily recovering housing sector with a poorer than expected reading on consumer confidence.The Standard & Poor’s/Case-Shiller home price index showed that home prices rose in March from February in most major U.S. cities for the first time in seven months. Prices increased in 12 of the 20 cities it tracks.However, the Conference Board said its Consumer Confidence Index came in at 64.9 for May, down from a revised 68.7 in April. Economists had been expecting a reading of 70.