The Canadian dollar closed higher Tuesday amid rising commodities and little in the way of economic data.The loonie inched up 0.03 of a cent to 97.46 cents (U.S).
The April crude contract on the New York Mercantile Exchange was up 48 cents to $92.54 a barrel.
May copper rose 4 cents to $3.55 a pound while April gold bullion was ahead $13.70 to $1,591.70 an ounce.
Traders also digested data showing that industrial production in Britain fell sharply in January, raising fears the country will suffer its third recession in not much more than four years. Industrial production fell at a monthly rate of 1.2 per cent in January, in contrast to expectations for a modest 0.2 per cent rise.
They also looked to Italy and a bond auction where the government easily sold €7.75-billion ($10-billion Canadian) in 12-month bonds, though at slightly higher interest rates, in the first test of market sentiment since Fitch downgraded that country's rating due to political uncertainty.
In Tuesday's auction, Italy paid 1.28 per cent interest on the debt, up from 1.09 per cent in the last such auction a month earlier.
Italy's national elections last month ended with no clear winner, raising concern the country could lack leadership through its financial crisis.
In contrast, Spain sold €5.8-billion in short-term debt at a lower cost than a month ago in a further indication that investors are less fearful over the state of Madrid's public finances.
The Treasury sold €3.85-billion in 12-month bills at an average interest rate of 1.36 per cent, compared with 1.55 per cent in the last such auction Feb. 12.
Meanwhile, analysts said technical indicators suggest the loonie could find support from higher Canadian oil prices.
Heavy crude, like that produced in the Alberta oil sands, has historically traded at a discount to West Texas intermediate, a U.S. light oil benchmark priced at Cushing, Okla., and Brent crude.
The price of the Canadian crude, known as Western Canadian Select, has until recently traded at much steeper discounts to WTI and Brent than normal as pipeline bottlenecks prevent growing oil sands production from getting to the most lucrative markets. However, that has since sharply improved.
"The Brent-WCS spread has nearly halved from its elevated levels in late December, 2012, and should prove Canadian dollar positive as it narrows further," said Scotia Capital currency strategist Eric Theoret.
He noted that the Bank of Canada estimated that Canadian gross domestic product growth "was reduced by 0.4 per cent in the second half of 2012 as a result of the spread between WCS and Brent."
On Tuesday, Brent crude traded at approximately $110 while WCS traded at around $70 a barrel.
On the economic calendar, data coming out Friday are expected to show that the Canadian housing market is cooling at a faster pace. Existing home sales for February are expected to show a 12.5 per cent year-over-year decline following a 5.2 per cent slide in January. Average prices for February are expected to slip 1 per cent.
In the U.S., investors will take in the February report on retail sales on Wednesday. It is expected that sales rose by 0.5 per cent following a 0.1 per cent gain in January.