TORONTO – The Canadian dollar closed higher Wednesday while the greenback weakened after the U.S. Federal Reserve embarked on another bond-buying program to keep long-term interest rates low to support a fragile recovery.
The loonie rose 0.15 of a cent to 101.55 cents US as the central bank also said it would keep its key rate at 0.25 of a per cent as long as the jobless rate stays above 6.5 per cent. The Fed had previously committed to keeping the rate unchanged until the end of 2015.
The Fed’s latest stimulus program involves spending US$45 billion a month on Treasurys, which would complement an existing program where the Fed buys mortgage-backed securities to the tune of $40 billion a month.
The central bank has launched three rounds of quantitative easing since the financial crisis hit in 2008 and they have been widely credited with strengthening financial markets.
Gold prices shot up on heightened inflation concerns after the Fed announcement. February bullion gained $8.30 to US$1,717.90 an ounce.
Crude prices were higher as OPEC oil ministers signalled that they will stick to current daily output targets of 30 million barrels at their meeting Wednesday.
The January crude contract on the New York Mercantile Exchange was up 98 cents to US$86.77 a barrel.
Prices held up despite data that showed an unexpected increase in crude supplies last week, along with a bigger than expected jump in gasoline inventories. Crude supplies rose by 800,000 barrels instead of an expected 2.5-million-barrel decline. Gasoline supplies climbed by five million barrels, about twice the amount forecast.
Copper prices also improved with the March contract on the Nymex ahead three cents to US$3.72 a pound.
On the economic front, there was another indication that the recession in the eurozone is worsening.
Eurostat, the EU’s statistics office, said industrial production fell by a monthly 1.4 per cent in October, in contrast to expectations of a modest 0.2 per cent increase.
Germany, Europe’s biggest economy, fared particularly badly,with its industrial sector posting a 2.4 per cent monthly decline in output. Germany has actually seen its industrial sector shrink for three straight quarters.
The eurozone fell back into a mild recession in the third quarter.