02/18/2015 08:45 EST | Updated 04/20/2015 05:59 EDT

Loonie closes lower as oil prices retreat, Fed signals no rush to hike rates

TORONTO - The Canadian dollar closed lower Wednesday as oil prices retreated. But the currency closed above the worst levels of the session as the U.S. Federal Reserve signalled it was in no rush to raise interest rates from near zero, where they've been since the financial collapse of 2008.

The loonie declined 0.28 of a U.S. cent to 80.53 cents.

Minutes from the most recent meeting of the Fed on rates showed officials expressing concern about inflation and lingering weakness in the labour market. They also show that officials struggled to determine the appropriate timing for a rate hike.

Officials were also concerned about dropping the word "patient" to describe how long they were willing to wait, fearing that could cause financial markets to overreact.

Analysts had said that a string of strong economic reports was making it difficult for the Fed not to raise rates as early as June.

The rate story has been quite different in Canada after the Bank of Canada cut its key rate by a quarter point to 0.75 per cent in January to deal with the economic fallout from the collapse in oil prices. Many analysts think the central bank will follow up with another cut as early as March.

Meanwhile, oil prices declined after three days of advances with the March contract down $1.39 to US$52.14 a barrel.

April gold faded $8.40 US$1,200.2 an ounce while March copper gained three cents to US$2.61 a pound.

On the economic calendar, U.S. building permits in January fell 0.7 per cent from December to an annualized rate of 1.053 million units. Other U.S. data showed that industrial production grew by 0.2 per cent in January, lower than the 0.4 per cent reading that economists had expected.

Traders also awaited an official proposal from Greece to extend a bailout program that would keep the country solvent and within the euro currency bloc.

The Greek plan would involve extending the 240 billion euro loan agreement that has kept the country afloat since 2010. However, it was unclear whether that would be acceptable to eurozone finance officials, who will meet Thursday to discuss the request, since the new government in Athens insists it will not accept any extension of previous bailout conditions.

Greece's creditors in the 19-country eurozone had given Greece until the end of the week to request an extension of the bailout agreement. After that, emergency liquid assistance (ELA) from the European Central Bank will likely dry up.