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Loonie closes lower as greenback strengthens

Canadian dolla

Jonathan Hayw/The Canadian Pr

The Canadian dollar closed lower Tuesday as traders hope for clarity on what the U.S. Federal Reserve may decide to do about cutting back on asset purchases.

The loonie ended down 0.21 of a cent at 94.25 cents (U.S.) amid a strengthening greenback as a two-day Fed meeting got under way Tuesday.

Traders weighed the odds of the Fed announcing Wednesday that it will start to taper bond purchases, which have been at $85-billion a month. This third episode of quantitative easing by the Fed has underpinned a strong rally in many stock markets while keeping long-term rates low.

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Opinion is split, with many analysts believing incoming chairwoman Janet Yellen may hold off until March, allowing the Fed to collect more data pointing to a steadily improving economic climate and particularly job creation.

The drop in the loonie came amid data showing that Canadian manufacturing sales registered a healthy increase in October and hit a 17-month high.

Statistics Canada reported that sales increased by 1 per cent in October to $50.1-billion (Canadian). Economists had expected a decline of 0.3 per cent.

The agency said that with this gain, sales reached their highest level since May, 2012. The sales increase in October was mostly caused by higher sales in the food industry. Sales also rose notably in the chemical industry.

In the United States, lower gasoline costs kept overall U.S. consumer prices unchanged in November.

That showing followed a 0.1 per cent decline in October.

Commodity prices retreated amid concerns that economies would falter if the Fed tapers.

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The January crude contract on the New York Mercantile Exchange slipped 26 cents to $97.22 (U.S.) a barrel.

March copper was a cent lower at $3.32 a pound while February gold bullion fell $14.30 to $1,230.10 an ounce.

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