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Loonie closes lower as U.S. dollar strengthens

A Canadian dollar or loonie is pictured.

Jonathan Hayward/THE CANADIAN PRESS

The Canadian dollar closed lower Tuesday, a day ahead of the Bank of Canada's latest announcement on interest rates.

The currency fell 0.2 of a cent to 91.1 cents (U.S.) as no change is expected in key rates.

"We see no move in the bank's official bias (still firmly neutral) or in the overnight rate target (expected to remain pegged at 1 per cent as it has since September, 2010) but a modestly less dovish tone," said Mark Chandler of RBC Dominion Securities.

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The bank also delivers its latest monetary policy report on Wednesday followed by a news conference by Governor Stephen Poloz.

Meanwhile, the U.S. dollar gained amid nervousness centred on China as lending data showed a tightening of credit growth.

Money supply growth climbed just 12.1 per cent year over year in March, the slowest pace in 17 years.

And that slowing in credit growth raised fresh worries about the world's second-biggest economy. There are concerns that gross domestic product growth may fall below 7 per cent in the current year, a full 0.5 of a percentage point below the government's target for growth. Official growth figures for China will be released Wednesday.

The rising U.S. dollar helped depress commodity prices. A stronger greenback makes it more expensive for holders of other currencies to buy oil and metals, which are dollar-denominated.

May crude on the New York Mercantile Exchange fell 30 cents to $103.75 a barrel.

May copper was down 6 cents to $2.99 a pound while June gold bullion fell $27.20 to $1,300.30 an ounce.

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