01/28/2015 08:29 EST | Updated 03/30/2015 05:59 EDT

Loonie drops below 80 cents amid tumbling oil, U.S. interest rate speculation

TORONTO - The Canadian dollar fell sharply Wednesday to below the 80-cent US level as oil prices retreated to fresh six-year lows and traders considered a less dovish than expected announcement on interest rates by the U.S. Federal Reserve.

The loonie lost 0.75 of a cent to 79.87 cents US, its lowest close since April 2009.

The Fed has been generally expected to hike rates from near zero around the middle of this year. But there has been growing speculation that the Fed could opt to move much later in the year because of a stubbornly slow global economic recovery.

While the Fed said Wednesday that it would remain "patient" in beginning to normalize monetary policy, it also had positive things to say about the American economy.

Among them, that economic activity is expanding at a solid pace, household spending is growing moderately and that household purchasing power has been boosted by sharply lower gasoline prices.

Oil prices retreated with March crude down $1.78 to US$44.45 a barrel, the lowest close since early March 2009, amid fresh inventory data showing U.S. crude supplies at 80-year highs.

Prices fell after the U.S. Energy Information Administration said U.S. oil supplies rose by 8.9 million barrels last week, far higher than the 3.5-million-barrel increase that economists had expected.

Prices have plunged 55 per cent from the highs registered last summer because of a glut of supply on world markets. They have plunged 40 per cent just since the end of November when Saudi Arabia opted to leave production levels unchanged.

On Wednesday, Barclays further cut its outlook for West Texas Intermediate, used as the North American benchmark for prices. Barclays expects WTI to average US$42 a barrel in 2015, down from its Dec. 1 forecast of $66. It expects WTI to rise to $57 a barrel in 2016.

Elsewhere on commodity markets, gold declined $5.80 to US$1,285.90 an ounce while March copper edged up two cents to US$2.48 a pound after tumbling eight cents on Tuesday.

Traders looked to the release Friday of the latest economic growth data. Statistics Canada is expected to report that gross domestic product rose by 0.1 per cent in November.