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Loonie loses early gains to close slightly higher

Canadian dollar coins.

Paul Chiasson/THE CANADIAN PRESS

The Canadian dollar closed slightly higher Wednesday amid strong U.S. jobs data.

The loonie inched up up 0.03 of a cent from Monday to end at 93.75 cents (U.S.) after earlier hitting 94.12 cents, its best level since December. Banks were closed Tuesday for the Canada Day holiday.

The loonie lost early momentum while the greenback advanced after U.S. payrolls firm ADP reported that the American private sector created 281,000 jobs in June.

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That report came out one day before the release of the U.S. government's employment report for June. The reading raised hopes that the government figures will also show that the American economy cranked out more than the 210,000 private and public sector jobs that economists had forecast.

Canadian employment data for June will be released on July 11.

The dollar has been steadily rising over recent weeks because of a number of factors.

Oil prices have climbed amid rising geopolitical tensions in Ukraine and the Middle East. Also, higher-than-expected inflation figures have raised questions about whether the Bank of Canada might raise interest rates sooner than expected.

The currency also found support this week in strong manufacturing data from China and the U.S.

However, analysts think the rally in the loonie could be short-lived.

"We do not expect [the currency] to sustain these levels for long," said Camilla Sutton, chief foreign exchange strategist at Bank of Nova Scotia.

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"The Bank of Canada and exporters are likely uncomfortable as the economy is not strong enough to sustain these Canadian dollar levels."

Commodities were mixed with August crude on the New York Mercantile Exchange down 86 cents to a three-week low of $105.08 a barrel. Prices had drifted higher to almost $107 in June amid a growing insurgency in Iraq, but have since fallen as the fighting remains well away from the south where most of Iraq's oil production is located.

July copper gained 6 cents to $3.27 a pound while August gold bullion was up $4.30 to $1,330.90 an ounce.

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