The loonie was higher Thursday, as the U.S. dollar weakened after the Federal Reserve reassured traders that it’s not too worried about inflation.
The Canadian dollar rose 0.18 of a cent to 92.35 cents US.
Markets had been prepared for a more hawkish stance from the U.S. central bank, which delivered its latest policy announcement following a two-day meeting Wednesday. But instead of sending signals that interest rates will soon be on the rise due to the latest inflation data that suggests consumer price increases are picking up, Fed chair Janet Yellen dismissed the data calling it “noisy.”
The U.S. government says the consumer price index rose 0.4 per cent in May and has risen 2.1 per cent over the past 12 months – roughly at the level of the Fed’s previous target rate for inflation.
In its latest announcement, the U.S. central bank barely increased its estimate of inflation, suggesting that it doesn’t feel rising pressure to raise short-term interest rates. Most economists believe the central bank won’t likely raise interest rates until 2015.
Also, the Fed announced that it’ll cut its monthly bond purchases by US$10-billion to US$45-billion in July, citing an improving U.S. job market. This will be the fifth cut in the purchases since December as the Fed slows the support it’s providing the American economy. The stimulus has helped keep borrowing rates low and supported equity markets.
Meanwhile this week, there were more signs of an improving Canadian economy.
Statistics Canada reported that wholesale sales rose 1.2 per cent to $51.2-billion in April, following a decline in March.
The agency says higher sales were recorded in all subsectors except for food, beverage and tobacco. The largest gain in April was in the building material and supplies subsector, which rose 3.6 per cent to $7.4-billion in a fourth consecutive monthly increase.
No Canadian economic data is set for release Thursday.
Continued geopolitical instability in Iraq is also supporting the Canadian dollar, by pushing up the oil prices.
In Iraq, troops and Islamic militants battled for control of Iraq’s largest oil refinery, which by late Wednesday remained in government hands. All of the facility’s output is used domestically so crude production and exports aren’t affected but the violence underscores how the fighting may threaten the energy infrastructure that Iraq is rebuilding to meet global demand.
The July crude contract fell 21 cents to US$105.76 a barrel.
August gold bullion gained $14.30 to US$1,287 an ounce, while July copper was unchanged at US$3.06 a pound.Report Typo/Error