TORONTO – The Canadian dollar was up slightly Wednesday as military tensions in the Middle East eased after the U.S. administration said it will back off from military action if Syria hands its chemical weapons over to international control.

The loonie was ahead 0.09 of a cent to 96.73 cents US.

U.S. President Barack Obama said late Tuesday that the U.S. will back down from a military strike on Syria, but will continue to stay prepared to attack Syria if they renege on their plans.

The development followed weeks of tension after the U.S. threatened military action against Syria for an alleged sarin gas attack on Aug. 21 in a suburb of Damascus that killed 1,429 people.

The loonie has gotten a lift this week as the U.S. dollar has weakened as the markets gear up for next week’s Federal Reserve policy meeting. While the latest U.S. retail sales data for August set for release Friday will undoubtedly help set the tone for the Fed meeting.

Over recent weeks, the markets have priced in the likelihood that the Fed will start to reduce its monetary stimulus at the meeting. The main question for most traders is how much the $85 billion of monthly asset purchases will be reduced.

The U.S. dollar’s near-term fortunes likely rest on the Fed policy decision. Over recent days, the currency has traded within fairly narrow ranges against its main competitors and that trend continued Wednesday.

Lessened instability in Syria has also caused commodity prices to drop. The October crude contract on the New York Mercantile Exchange dipped a penny to US$107.38.

Gold prices fell $2.60 to US$1,361.40 an ounce and December copper was up a penny to $3.28 a pound.