02/05/2015 03:42 EST | Updated 04/07/2015 01:59 EDT

Loonie up amid lower than expected rise in trade deficit, higher oil prices

TORONTO - The Canadian dollar closed sharply higher Thursday amid a better than expected read on the country's trade picture and rising oil prices.

The loonie ran up 0.9 of a cent to 80.49 cents US a day after tumbling oil prices sent the loonie down by more than one U.S. cent.

Statistics Canada reported the country's merchandise trade deficit grew to $649 million in December from $335 million in November. However, the shortfall was less than the $1.2-billion deficit economists had expected.

During December, imports increased by 2.3 per cent while exports rose 1.5 per cent.

There were export gains in eight of 11 sections, led by metals and non-metallic mineral products. But there was also a 10.3 per cent drop in energy products to $8.6 billion, the seventh consecutive monthly decrease.

Crude prices have been volatile over the last week on hopes that a series of cutbacks by oil producers had started to bite into a supply/demand imbalance that has sent prices plunging by 50 per cent since last summer. But those hopes took a hit after figures showing oil inventories grew more than expected and oil prices fell nine per cent on Wednesday.

On Thursday, the March oil contract in New York was up $2.03 to US$50.48.

Elsewhere on commodity markets, the April gold bullion contract was down $1.80 to US$1,262.70 an ounce while the March copper contract was unchanged at US$2.59 a pound.

Overseas, the European Central Bank tightened the screws on the Greek banking system in a move that piles pressure on the country's new anti-austerity government to conclude a compromise deal with bailout creditors.

The ECB said it would stop lending to Greek banks using the country's junk-rated government bonds as collateral. The ECB justified the move by saying prospects appear uncertain for a new deal between the radical left government in Athens and its creditors. Greek banks retain access to emergency lending, but at a higher cost and subject to ECB approval.

Traders also looked ahead to January employment data from Canada and the U.S. on Friday.

Economists expect Statistics Canada will report that the economy created about 5,000 jobs last month. They're also expecting the U.S. government data to show the economy cranked out about 233,000 jobs during January.