03/07/2012 09:04 EST | Updated 05/07/2012 05:12 EDT

Loonie up amid rising commodities, traders look to interest rate announcement

TORONTO - The Canadian dollar reversed course to close slightly higher Wednesday as commodity prices shook off early losses and traders looked ahead to the next interest rate announcement by the Bank of Canada.

The loonie was up 0.24 of a cent to 100.18 cents US.

The loonie had lost almost two-thirds of a US cent Tuesday after slower growth prospects for China and data showing the eurozone economy contracted in the fourth quarter of last year raised worries about the strength of the global economy.

Commodity prices were higher after economic concerns sent oil, copper and gold sharply lower.

Oil prices took off on a sign of higher-than-expected demand. The U.S. Energy Information Administration said oil supplies increased 800,000 barrels last week against the rise of two million barrels that analysts had expected.

The April crude contract on the New York Mercantile Exchange gained $1.46 to US$106.16 a barrel after losing US$2 Tuesday.

Copper prices stabilized after demand concerns sent the metal tumbling 12 cents and the May contract was up three cents at US$3.77 a pound.

And the April gold contract in New York rose $11.80 to US$1,683.90 an ounce.

The Bank of Canada makes its next scheduled announcement on interest rates Thursday. The bank is widely expected to leave its key rate at one per cent.

"We expect Governor Carney to sound slightly more confident on the external environment (and) note the improvement in the U.S. but remain cautious on his tone towards higher interest rates in Canada," said Scotia Capital chief currency strategist Camilla Sutton.

There were also worries about the latest deadline in Greece's debt crisis. Hedge funds and banks that own Greek government debt have until Thursday night to exchange their bonds for new ones that are less valuable. If too few are willing, Greece might default, which would rattle the global financial system.

Traders also got some good news two days before the release of the U.S. non-farm payrolls report for February. Payroll company ADP reported that the American private sector created 216,000 jobs during the month. Economists have expected the report to say that overall, 210,000 jobs were created last month in the U.S. That would be the third consecutive month that the U.S. has racked up job gains of at least 200,000.

February jobs data for Canada also comes out Friday. The consensus calls for the economy to have created about 14,000 jobs last month.

Sentiment was also lifted during the afternoon from a report that U.S. Federal Reserve officials are considering a new type of quantitative easing that will attempt to boost the economy without accelerating inflation.

The Wall Street Journal says that under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates.