TORONTO – The Canadian dollar closed higher Wednesday amid sharply higher prices for oil and copper.
The commodity-sensitive loonie was up 0.05 of a cent to 97.5 cents US with support also coming on hopes that the European Central Bank will move to stimulate the continental economy.
Oil and copper sustained steep declines last week amid signs of slowing growth in China.
But on Wednesday, the ECB speculation and data showing oil inventories rose less than expected sent oil to its highest level in almost two weeks. Benchmark oil for June delivery rose $2.25 to $91.43 a barrel after the U.S. Energy Department said crude oil supplies rose by 900,000 barrels, far less than the 1.4 million barrels that economists expected.
May copper improved by six cents to US$3.16 a pound after Goldman Sachs says the outlook for copper prices is expected to rebound in the next three months, aided by Chinese growth in the second half of the year, and the U.S. economy heading towards a soft patch.
June bullion gained $14.90 to US$1,423.70 an ounce, its highest close since April 12.
Risk sentiment had improved amid evidence that Europe’s economic downturn is affecting its strongest member, Germany.
And there is a growing conviction by many experts that the European Central Bank will cut interest rates from the current record low.
The Ifo business optimism index fell to 104.4 points in April from 106.7 in March, more than the modest dip foreseen by market analysts to 106.2.
European markets have also been buoyed in recent days by progress in Italy to produce a government after inconclusive elections in February. The president was reelected over the weekend and was expected to ask a center-left politician, Enrico Letta, to form a new executive government.