03/29/2012 11:54 EDT | Updated 05/29/2012 05:12 EDT

Canadian dollar higher as commodities decline, traders look to federal budget

TORONTO - The Canadian dollar closed higher Thursday just before the latest federal budget was released, with a promise of deep spending cuts and government streamlining.

The currency closed up 0.12 of a cent to 100.33 ahead of the budget's release but later slipped 0.02 of a cent to 100.31 cents US as Finance Minister Jim Flaherty announced more than $5 billion in spending cuts by 2014-15.

Flaherty also said that 19,200 federal positions are to be eliminated, or 4.8 per cent of the federal workforce.

As widely anticipated, the government will raise the age of eligibility for old age security and the guaranteed income supplement gradually to 67 from 65, beginning in 2023.

Earlier in the day, commodity prices were mainly lower amid fresh worries about the state of the global economic recovery.

Markets have been weak as a flurry of tepid economic data, including durable goods orders and consumer confidence, raised concerns about the pace of the American economic revival.

Traders have also become more bearish on the Chinese economy, which has been a major pillar in supporting the recovery from the 2008 financial crisis and recession.

The growing Chinese economy has been of special benefit to commodities because of the country's huge appetite for oil and metals.

But the Chinese economy has been slowing from double-digit growth to gains of about seven per cent as the government slows the economy in order to drive down high inflation.

Oil prices continued to lose ground after data released Wednesday showed a much bigger than expected increase in U.S. crude inventories last week. Other factors driving oil later included comments by Saudi Arabia's oil minister that his country is capable of pumping more crude to counter high prices, and expectations the U.S. and other countries could release emergency reserves to also counter high prices.

The May crude contract on the New York Mercantile Exchange fell $2.63 to US$102.78 a barrel after tumbling almost $2 Wednesday.

Copper prices inched higher, closing up almost half a cent to US$3.80 after falling 10 cents over the last two sessions amid worries about slowing economic conditions in the U.S. and China, the world's biggest economies. China is the world's biggest consumer of the metal, which is viewed as an economic bellwether because it is used in so many applications.

Bullion prices added to a $27 slide on Wednesday, down $5.70 to US$1,652.20 an ounce.