Canadian dollar pulls back on lower oil and gold as Bank of Canada holds rates

TORONTO – The Canadian dollar retreated Wednesday amid a pullback in oil and gold prices and reassurances from the Bank of Canada that it will leave is key interest rate unchanged.

The loonie lost 0.35 of a U.S. cent to 78.03 cents US, coming down after three days of advances that saw the currency rise more than 2.3 U.S. cents to settle at its highest close since July.

Meanwhile, strong industrials and bank stocks helped push the Toronto stock market ahead for a fourth-straight session, with the Toronto Stock Exchange’s S&P/TSX composite index advancing 89.93 points to 13,671.35.

New York markets were also solidly ahead for a second straight day, with the Dow Jones industrials soaring 187.03 points to 17,908.28, while the broader S&P 500 advanced 20.70 points to 2,082.42 and the Nasdaq composite jumped 75.33 points to 4,947.42.

Elsewhere in commodities, May natural gas was up three cents at US$2.04 per mmBTU, while May copper advanced two cents to US$2.17 a pound and June gold shed $12.60 to US$1,248.30 a troy ounce.

In its latest announcement, the Bank of Canada said it was keeping its trend-setting interest rate locked at 0.5 per cent, predicting that the economy will grow by 1.7 per cent in 2016, up from its January expectation of 1.4 per cent.

Todd Mattina, chief economist at Mackenzie Investments, said the fact that the data from the central bank did little to impact the Canadian dollar in either direction is good news for policy-makers.

“To see a subdued reaction to the Canadian dollar will be encouraging to the bank,” he said.

A drop in oil prices also weighed on the loonie, as the May contract for benchmark North American crude edged down 41 cents to US$41.76 a barrel after closing above $42 Tuesday, its highest level since late November.

Investors were buoyed following a report from Russia’s Interfax news agency this week ofa possible deal between Russia and Saudi Arabia on reducing output. But on Wednesday, a Saudi-owned newspaper reported that a top official said to “forget about this topic” when asked about a production cut.

The back and forth chatter comes as members of the Organization of the Petroleum Exporting Countries are set to meet on Sunday in Doha, Qatar.

“A good part of the rally in oil has been anchored by expectations of some kind of production agreement between OPEC and Russia,” said Mattina.

“The Doha meeting could set the stage for stabilization in the oil market but there are still enormous headwinds facing oil prices, which could lead to downward pressure on oil prices down the road.”

Even if the countries agree on a freeze, he noted that oil stockpiles are still high, particularly in the U.S., with current production levels also at historical levels. A cut is also likely not on the table because new producers like Iran and Iraq are eager to increaseproduction.

Earlier, China, the world’s second largest economy, surprised markets by reporting stronger than expected trade data. China said exports have risen for the first time in nine months, a sign that the outlook may be improving.

Follow @LindaNguyenTO on Twitter.