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Loonie loses more than a cent as greenback strengthens

A loonie is pictured in North Vancouver, B.C., Tuesday, Dec.31, 2013.

JONATHAN HAYWARD/THE CANADIAN PRESS

The Canadian dollar fell more than a cent to close at a multi-year low Tuesday as the greenback shot higher on data showing the U.S. trade deficit dropped in November to its lowest level in four years.

The greenback also strengthened a day before the release of the minutes from the Federal Reserve meeting last month.

The loonie lost 1.05 cents to end at 92.83 cents (U.S.), its lowest close since early November, 2009. The currency was further pressured by data showing Canada's trade deficit worsened slightly in November, rising to $940-million (Canadian) from $908-million in October.

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The U.S. trade gap dropped 12.9 per cent to $34.3-billion (U.S.) in November as exports rose 0.9 per cent, aided by a 5.6 per cent rise in petroleum exports. Imports dropped 1.4 per cent.

"The underline from the [Canadian] trade report was fairly weak, there wasn't a lot of encouragement within the underlying pieces of the report – all in all it was taken fairly negatively," said Camilla Sutton, chief currency strategist at Bank of Nova Scotia.

"And the U.S. number was strong because of the oil side, and having reduced imports just highlights the uncertainties we have in Canada around our own oil sector."

It is a heavy week for economic data with the most closely watched data of the week coming on Friday. Economists forecast that the U.S. non-farm payrolls report will show that about 195,000 jobs were created in December.

The reading will help the U.S. Federal Reserve determine how fast it will cut back on a key stimulus program, its $85-billion of monthly bond purchases. The central bank said last month that it would taper those purchases by $10-billion starting this month.

Analysts suggest that the dollar could rally further if the Fed minutes show strong support by central bank officials at the end of last year to start tapering. Likewise, lukewarm support for tapering could push the U.S. currency lower.

"A less dovish Fed would remove a key factor that had been undermining the U.S. dollar, and speculation of continued tapering has taken much of the pressure off the greenback, enabling it to rebound," observed Colin Cieszynski, market analyst at CMC Markets Canada.

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Canadian employment figures will also be released Friday and traders looked for about 13,000 jobs to have been created in December.

On the commodity markets, the February crude oil contract on the New York Mercantile Exchange rose 42 cents to $93.85 a barrel.

The March copper contract was unchanged at $3.36 a pound while the February gold bullion contract was off $8.40 to $1,229.60 an ounce.

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