BUSINESS

Loonie rises as oil hits 15-month high, Fed offers little new about stimulus

07/10/2013 08:30 EDT | Updated 09/09/2013 05:12 EDT
TORONTO - The Canadian dollar advanced slightly Wednesday amid surging oil prices while traders took in the release of minutes from the latest U.S. Federal Reserve meeting.

The loonie was up 0.08 of a cent to 95.08 cents US with little in the minutes to indicate when the central bank might move on relaxing economic stimulus.

The minutes showed that about half of the Fed's 19 member policy-making committee said they would support ending its $85 billion-a-month bond-buying program late this year. But many agreed at the meeting last month that the improvement in the job market would have to be sustained before the Fed would reduce its bond purchases.

The meeting was held prior to the release of a much stronger than expected U.S. employment report for June which came out last Friday.

Expectations of a tapering in bond buying has had the effect of pushing U.S. Treasury yields sharply higher. On Wednesday, the benchmark 10-year Treasury was up slightly from before the release of the Fed minutes to 2.69 per cent, up sharply from about 1.7 per cent at the beginning of May.

Commodity markets were higher despite glum Chinese data.

China's exports fell by 3.1 per cent in June compared with a year earlier and imports contracted by 0.7 per cent, customs data showed Wednesday. Both were below forecasts of growth in the low single digits.

The report was issued a day after the International Monetary Fund scaled back its China 2013 growth forecast to 7.8 per cent from 8.1 per cent.

The figures fed perceptions that China's economic expansion is slowing due to weak global demand and an effort by the Chinese central bank to cool a credit boom.

Oil ran ahead $2.99 to US$106.52 a barrel, the highest close since late March 2012 as the American Petroleum Institute said that U.S. crude inventories fell by nine million barrels last week, much higher than the 3.8-million-barrel drop that analysts had expected.

A drop in supplies would suggest stronger demand and underline the signs of economic recovery shown in last week’s stronger-than-expected U.S. hiring report. Analysts had projected a decline of 3.8 million barrels.

Growing unrest in Egypt has also helped support oil prices lately.

August gold gained $1.50 to $1,247.40 an ounce while September copper gained three cents to US$3.09 a pound.