10/28/2013 08:38 EDT | Updated 01/23/2014 06:58 EST

Canadian dollar rises following steep declines, traders look to Fed announcement

TORONTO - The Canadian dollar closed higher Monday, finding some lift after tumbling last week in the wake of a signal by the Bank of Canada that interest rate hikes likely aren't in the cards for next year.

The loonie rose 0.09 of a cent to 95.74 cents US after the central bank switched its bias from tightening to neutral while downgrading its economic outlook through 2015. The announcement sent the loonie skidding 1.5 cents US last week.

Traders looked to this week's Federal Reserve policy meeting amid speculation on when the Fed will reduce its key monetary stimulus, which has kept long term rates low and supported a rally on many stock markets.

The Fed is currently buying US$85 billion of U.S. government bonds and other securities each month but there are low expectations for the Fed doing anything to taper the purchases just yet.

The partial U.S. government shutdown earlier this month has delayed the release of crucial economic data the Fed would need before it decided to start to back off on those purchases.

In Canada, the major economic report of the week comes down on Thursday. Statistics Canada is expected to report that gross domestic product grew by 0.2 per cent in August.

Commodities were mixed with December crude up 83 cents to US$98.68 a barrel.

December copper was unchanged at US$3.27 a pound while December bullion faded 30 cents to US$1,356.40 an ounce.

On the economic front, data showed that U.S. factories barely boosted their output in September, adding to other signs that the economy was slowing even before the government shutdown began on Oct. 1.

The U.S. Federal Reserve announced that manufacturing production rose only 0.1 per cent in September, down from a 0.5 per cent gain in August, which was slightly lower than previously reported.

Overall industrial production increased 0.6 per cent in September, mostly because of a 4.4 per cent jump in utility output.

Other data showed that pending home sales fell 5.6 per cent in September.