07/18/2012 10:13 EDT | Updated 09/17/2012 05:12 EDT

Loonie moves higher amid rising commodity prices, warning of slowing economy

TORONTO - The Canadian dollar closed higher Wednesday amid rising prices for oil and copper and despite a warning of worsening economic conditions in Canada.

The commodity-sensitive loonie was up 0.18 of a cent to 98.94 cents US.

The Bank of Canada's latest monetary policy report said that the Canadian economic recovery is struggling to retain momentum amid mounting global problems and softer conditions at home that leave few remaining pillars of strength to sustain growth.

The bank says each of the next four quarters will be weaker than it predicted in its last report in April.

The report was released a day after the bank opted to leave interest rates unchanged at one per cent while again indicating that rates will rise in the future.

Commodity prices turned higher as American builders last month broke ground on the most new homes and apartments in nearly four years. The U.S. Commerce Department says that housing starts rose 6.9 per cent in June from May to a seasonally adjusted annual rate of 760,000, which beat expectations of 743,000. At the same time, the number of permits to build homes, a sign of future construction, fell 3.7 per cent to 755,000. But that’s down from May’s three-and-a-half-year high.

The August crude contract on the New York Mercantile Exchange rose 65 cents to a seven-week high of US$89.87 a barrel.

Copper prices added two cents to US$3.47 a pound while gold faded $18.70 to US$1,570.80 an ounce.

Traders also took in another day of testimony from U.S. Federal Reserve chairman Ben Bernanke, who was wrapping up his twice-a-year report to Congress.

Bernanke told lawmakers Wednesday that despite slowing economic conditions, he does not expect the U.S. to fall into recession.

On Tuesday, Bernanke said that the Fed is prepared to take further action if growth doesn’t improve. But Bernanke noted that there is only so much the Fed can do.