TORONTO - The Canadian dollar closed higher Wednesday as market sentiment got a lift from word the International Monetary Fund is looking to bolster its financial firepower to help deal with a global economic crisis.
The loonie was up 0.39 of a cent to 98.89 cents US.
The IMF said it aims to add US$500 billion to its resources so it can give out new loans to help mitigate a worsening financial crisis. The Washington-based institution said its staff estimates that countries around the world will need about $1 trillion in loans over the coming years. Most of the concerns centre on the 17-nation eurozone, which has been embroiled in a debt crisis for around two years.
The worsening economic climate was spelled out Wednesday by The World Bank, warned of a possible slump in global economic growth. It also urged developing countries to prepare for shocks that could be more severe than the 2008 crisis.
The bank cut its growth forecast for developing countries this year to 5.4 per cent from 6.2 per cent and for developed countries to 1.4 per cent from 2.7 per cent. For the 17 countries that use the euro currency, it forecast a contraction, with a growth outlook to be negative 0.3 per cent from growth of 1.8 per cent.
And the Bank of Canada said Wednesday that both the domestic and world economies are already paying a heavy price for Europe's unresolved debt crisis. The central bank expects the impact hold back the Canadian economy's growth by about 0.6 per cent this year, equivalent to about $10 billion.
The bank announced Tuesday that Canada's economy will likely grow by two per cent in 2012.
Commodity prices were mixed as the February crude contract on the New York Mercantile Exchange retained most of Tuesday's $2 jump, dipping 12 cents to US$100.59 a barrel.
Analysts said higher oil was partly supported by tension between Iran and Saudi Arabia, as well as a move by France to accelerate the EU's implementation of an embargo on Iranian oil exports.
Saudi Oil Minister Ali al-Naimi has said Saudi Arabia was ready to pump more oil if needed to make up for a shortfall in Iranian exports. That came as Iran warned Gulf nations not to make up any shortfall and that it may shut the Strait of Hormuz, which is used to transport about a fifth of the world's oil.
Copper prices improved, rising two cents to US$3.75 after stronger than expected Chinese economic data Tuesday sent the metal jumping nine cents. China is the world's biggest copper consumer.
And February gold on the Nymex gained $4.30 to US$1,659.90 an ounce.