The Canadian Press

The Toronto stock market closed lower as traders sold off the euro in favour of the U.S. dollar in the wake of a downgrade of Portugal’s debt.

The S&P/TSX composite index lost 81.57 points to 11,962.97 as the rising greenback punished oil and metal prices. The TSX Venture Exchange declined 9.94 points to 1,551.42.

The Fitch credit rating agency lowered its rating on Portugal’s debt by one notch to double-A-minus, saying the country’s recovery will be slower than other countries that use the euro and that could hurt Portugal’s ability to repay its debt.

The downgrade further eroded confidence in the euro, which fell to a fresh 10-month low against the U.S. dollar.

Both commodity prices and the Canadian dollar have lost ground in recent days as the euro weakened and traders fled to the relative safe haven of the American greenback.

The stronger U.S. dollar tends to make commodities more expensive to buy in other currencies and that cuts into demand from foreign buyers, while also reducing the number of American dollars that producers get for their sales.

“It’s still the big kahuna, it’s perceived as the one to go to — for now,” Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver, said of the flight to the U.S. dollar.

“Even though it’s been beaten up in the last little while, it’s still the one to go to because the U.S. is seen to be the stronger of the bunch. Who else are you going to go to? The Chinese currency? The euro?”

The higher U.S. dollar helped push Canada’s loonie down 0.89 of a cent to 97.53 cents US.

The May crude contract on the New York Mercantile Exchange lost $1.30 to US$80.61 a barrel, taking the energy sector down 0.74 per cent. Encana Corp. (TSX:ECA) dropped 67 cents to C$30.82 and Canadian Oil Sands Trust (TSX:COS.UN) dropped 65 cents to C$28.20.

Bonavista Energy Trust (TSX:BNP.UN) units declined 39 cents to $23.79 after it said it will pay $228 million cash to Suncor Energy (TSX:SU) for natural gas properties adjacent to its Whitecourt property in Alberta. It will fund the acquisition with a combination of equity sales and bank debt. Suncor shares were down 20 cents at $31.20.

Mining companies were under some pressure as the April gold contract on the Nymex faded $14.90 to US$1,088.80 an ounce. The gold sector lost ground as Barrick Gold (TSX:ABX) dropped $1.29 to C$38.15 while Goldcorp Inc. (TSX:G) fell $1.31 to C$38.23.

The base metals sector stepped back 0.68 per cent with May copper down three cents to US$3.35 a pound. HudBay Minerals (TSX:HBM) fell 52 cents to C$13.28 and Labrador Iron Mines Holdings (TSX:LIM) declined 23 cents to C$5.51.

Tech and telecom stocks also helped depress the TSX as Research In Motion Ltd. (TSX:RIM) lost 90 cents to $75.85 while Rogers Communications Inc. (TSX:RCI.B) fell 76 cents to $34.57.

Also pressuring the euro was the growing expectation that Greece will have to turn to the International Monetary Fund for part of a financial rescue package. Greece has a huge debt and needs help in refinancing it at a lower interest rate.

EU countries have resisted IMF involvement as it would highlight the inability of eurozone governments to deal with the Greek debt crisis on their own.

But beneath worry about government debt issues in Europe, investors are also concerned about how much bigger economies will deal with the massive levels of debt they have taken on to encourage recovery from the worst recession in decades.

“The U.S. is the big one,” Mastracci said.

“We don’t want what’s happening to Portugal and Greece and everybody else like that to happen to the U.S. And it will happen to them if they don’t take the bull by the horns” and soon deal with their massive debt levels, he said.

New York markets were also negative amid data showing continued growth in the U.S. manufacturing sector but more bad news from the housing sector.

The Dow Jones industrial average lost 52.68 points to 10,836.15. The Nasdaq composite index fell 16.48 points to 2,398.76 while the S&P 500 gave back 6.45 points to 1,167.72.

Reports showed that U.S. durable goods orders rose 0.5 per cent last month, slightly below expectations for 0.7 per cent growth. However, it was the third straight month that orders rose and, excluding the volatile transportation sector, orders jumped by a more-than-expected 0.9 per cent.

@page_break@The U.S. Commerce Department also reported that new home sales fell 2.2 per cent last month to a seasonally adjusted annual pace of 308,000 as stormy winter weather kept buyers on the sidelines. Economists had forecast a rise of 1.9 per cent.

U.S. Treasury prices were also in focus as bond prices dropped after an auction of US$42 billion in five-year Treasury notes drew weak demand. The yield on the five-year note, which moves opposite price, rose to 2.56 per cent from 2.42 per cent.

The yield on the benchmark 10-year note rose to 3.81 per cent from 3.69 per cent late Tuesday.

An auction Tuesday of US$44 billion in two-year notes also saw a drop in demand.

In other corporate news, AGF Management Ltd. (TSX:AGF.B) reported that its profit in the latest quarter was $30.6 million, up from $12.2 million in the comparable quarter of 2009. The mutual fund operator’s profit amounted to 34 cents per share, missing analyst estimates by a penny but its shares gained 19 cents to $18.77.

Shares in Electrovaya Inc. (TSX:EFL) jumped 86 cents or 71 per cent top $2.07 Wednesday after the lithium-ion battery producer officially announced it will supply Chrysler with batteries for a line of demonstration vehicles. This followed a gain of more than 12 per cent on Monday after Electrovaya announced that former Chrysler president Tom LaSorda will take on an advisory role with the company and join its board of directors.