12/21/2011 11:59 EST | Updated 02/20/2012 05:12 EST

Loonie makes gains amid stronger-than-expected October retail sales

TORONTO - The Canadian dollar closed higher Wednesday on a report showing much stronger than expected October retail sales and encouraging news about the U.S. economy.

The loonie added 0.42 of a cent to close at 97.48 cents US.

Statistics Canada said retail sales rose one per cent to $38.6 billion in October, their third straight monthly increase. Gains were reported in seven of 11 subsectors, representing 76 per cent of retail sales.

Sales by volume were also up for a third month in a row, rising 0.6 per cent in October.

"Canadian shoppers were surprisingly resilient in October, with retail sales jumping by 1.0 per cent from the previous month," said Emanuella Enenajor, an economist at CIBC World Markets.

"That’s nearly double the street's call, and matches the hefty pace seen in the prior month."

Even excluding auto sales, the results were up 0.7 per cent. Enenajor said that was "the quickest clip in eight months."

A report from the U.S. National Association of Realtors showed the number of Americans who bought previously occupied homes rose four per cent last month. But the association said it overstated about 3.5 million sales during and after the Great Recession, showing the housing market remains much weaker than previously thought.

The nearly 4.2 million homes sold last year are far fewer than the nearly 7.1 million sold at the peak of the housing boom in 2005. This year is on pace to slightly exceed last year's total.

"A broadening base of indicators shifting from not as bad as feared to much better than expected suggests that U.S. economic growth has finally kicked into gear over the last month or so," said Colin Cieszynski, a market analyst at CMC Markets Canada.

Meanwhile, commodity prices were mixed at midday. The February oil contract added $1.43 to US$98.67 a barrel after a report showed a dramatic drop in U.S. inventories.

Oil inventories typically fall at the end of the year because refiners draw down their inventories for tax reasons, but Wednesday's drop was far larger than analysts expected.

The Energy Information Administration said Wednesday that inventories fell by 10.6 million barrels. Analysts on average forecast a drop of 2.3 million barrels, according to Platts, the energy information arm of McGraw-Hill.

Oil prices are also being pushed up by better global economic news and fears that strife in some important oil-producing nations could restrict supplies.

Meanwhile, the February gold contract slid $4 to 1,613.60 per ounce. Copper prices were up two cents at $3.39 per pound.