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Loonie closes unchanged amid tame inflation data

Canadian dollar coins, or loonies.

Paul Chiasson/THE CANADIAN PRESS

The Canadian dollar closed unchanged Friday amid a stronger-than-expected showing on retail sales and tame inflation data.

The loonie was flat at 91.37 cents (U.S.) as Statistics Canada reported that the consumer price index for July declined 0.2 per cent, versus the 0.1 per cent dip that economists had expected. This translated to an annualized inflation rate of 2.1 per cent, weaker than the 2.2 per cent reading that was forecast and down from 2.4 per cent the previous month.

Retail sales for June jumped 1.1 per cent from May, much higher than the consensus estimate that had called for a 0.3 per cent advance.

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Excluding the vehicle sector, sales rose 1.5 per cent.

The market focus was on the U.S. Federal Reserve and a key speech Friday from Fed chair Janet Yellen.

She offered no signal that she's altered her view that the American economy still needs Fed support from interest rates that have been near zero since the financial crisis.

The central bank chief also said at the Fed's annual conference in Jackson Hole, Wyo., that the Great Recession complicated the Fed's ability to assess the U.S. job market and made it harder to determine when to adjust interest rates. She noted that while the unemployment rate has steadily declined, other gauges of the job market are harder to assess and may reflect continued weakness.

The Fed is generally expected to raise rates mid-2015 but there have been concerns the Fed might move even earlier.

Yellen reminded her audience that rate hikes could come sooner than expected if progress in the labour market continued to be more rapid than anticipated or if inflation moves up more rapidly.

Later in the day, European Central Bank head Mario Draghi told the meeting that the ECB is ready to do more to boost the shaky recovery in the 18 countries that use the euro but warned that governments must join in efforts to reduce stubbornly high unemployment.

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Meanwhile, geopolitical concerns were on the boil after Ukraine accused Russia of a "direct invasion" after Russia sent dozens of aid trucks into rebel-held eastern Ukraine on Friday without Kiev's approval.

The latest round of uncertainty pushed the December bullion contract in New York up $4.80 to $1,280.60 an ounce.

Elsewhere on the commodity markets, October crude was down 31 cents to $93.65 a barrel while September copper rose 3 cents to US$3.20 a pound.

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