07/18/2013 09:00 EDT | Updated 09/17/2013 05:12 EDT

Canadian dollar advances amid jump in oil prices, solid U.S. economic data

TORONTO - The Canadian dollar closed higher Thursday amid rising oil prices and positive American economic data.

The commodity-sensitive loonie was up 0.36 of a cent to 96.38 cents US after it clawed back a chunk of Wednesday's slide of nearly half a cent.

The dollar was lifted following a major U.S. manufacturing index that came in much better than expected. The Philadelphia Fed's manufacturing survey in July surged to its highest level in more than three years, coming in at 19.8, up from 12.5 in June. That was much higher than the reading of 10 that economists had expected.

Also, the New York-based Conference Board said its leading economic index was unchanged in June. It reported that the economy is seeing "positive but moderate" growth, and continued expansion is expected this year.

Benchmark crude for August delivery was ahead $1.56 at US$108.04 a barrel on the New York Mercantile Exchange after gaining 48 cents on Wednesday.

Despite cooling economic growth in China, the price of oil was underpinned by another sizable decline in U.S. oil supplies. The U.S. crude inventory fell by 6.9 million barrels last week, bringing the three-week decline to 27.1 million barrels.

The loonie fell Wednesday after the central bank dropped the reference that interest rates are likely to remain unchanged for a period of time. Instead, the bank’s new governor, Stephen Poloz, made clearer that he intends to make no changes as long as considerable slack remains in the economy, inflation remains muted and household finances continue to improve.

"Yesterday governor Poloz’s first interest rate statement, Monetary Policy Report and associated press conference removed much of the uncertainty that has clouded the BoC outlook over the last several months and maintained a slight hawkish bias," observed Scotia Capital chief currency strategist Camilla Sutton.

Traders also took in a second day of congressional testimony from U.S. Federal Reserve chairman Ben Bernanke. He reiterated that the Fed's efforts to boost the U.S. economy remain tied to the job market’s health and inflation

He told lawmakers Wednesday that the Fed’s timetable for reducing its bond purchases was not decided and that the central bank could even boost them if the economy fails to meet expectations.

The Fed chief also said that the central bank wants to see substantial progress in the job market before scaling back its $85 billion a month in purchase of government bonds and other financial assets.

Sutton said Bernanke's comments Wednesday were "fairly dovish."

"However, we do not expect the Fed to fully convince markets that tapering quantitative easing combined with a pushing out of interest rate expectations maintains the same level of accommodation."

Elsewhere on commodity markets, copper prices were unchanged at US$3.13 a pound while August bullion gained $6.70 to US$1,284.20 an ounce.