08/15/2012 08:45 EDT | Updated 10/15/2012 05:12 EDT

Loonie closes at highest level since May on strong U.S. economic data, oil prices

TORONTO - The Canadian dollar closed Wednesday at its highest level since early May amid rising prices for oil and positive economic data from the country's biggest trading partner.

The loonie edged up 0.29 of a cent to 101.11 cents US.

U.S. industrial production climbed 0.6 per cent in July on top of a 0.4 per cent gain in June and better than the 0.5 per cent reading that economists had forecast.

That was good news coming on top of a strong reading that came out Tuesday on U.S. retail sales for July.

The loonie often benefits from strong U.S. data as an improving American economy supports demand for Canadian commodities and manufactured goods.

Other data out Wednesday showed that U.S. inflation remains tame as the consumer price index was unchanged in July for the third time in four months. Economists had expected the CPI to rise 0.2 per cent.

Oil prices shook off early declines after a weekly U.S. government report showed a drop in inventories for last week. The September contract on the New York Mercantile Exchange gained 90 cents to a three month high of US$94.33 a barrel after the Energy Information Administration reported a decline of 3.7 million barrels in crude inventories, much higher than the 1.5-million-barrel drop that analysts expected.

The September copper contract on the Nymex was down a cent at US$3.35 a pound. Metal prices have weakened in the wake of data released over the past few days which showed slowing Chinese export growth and a sharp drop in economic growth in Japan in the second quarter.

December bullion also reversed early losses to move up $4.20 to US$1,606.60 an ounce.