TORONTO _ The Canadian dollar was lower Wednesday as oil prices retreated and traders looked to the mid-afternoon interest rate announcement by the U.S. Federal Reserve.
The loonie declined 0.12 of a cent to 80.5 cents US.
The Fed is widely expected to reiterate that it will be ``patient'' in raising interest rates from record lows. Markets have generally expected the Fed to hike around the middle of this year. But given recent global economic downgrades and rate cuts in Canada, Norway and Denmark, analysts say it`s very possible the Fed could move much later.
``Markets have been gradually losing confidence in the prospects for higher US policy rates this year, with short-rate futures scarcely pricing in a single (quarter point) rate hike by the end of this year,'' said a commentary from RBC Capital Markets.
Oil prices retreated with March crude down 87 cents to US$45.36 a barrel.
Oil prices fell after the American Petroleum Institute said Tuesday that crude oil supplies in the U.S. rose 13 million barrels in the last week, a much higher level than the 3.5 million barrels expected by analysts.
Prices have plunged 40 per cent just since the end of November when Saudi Arabia opted to leave production levels unchanged. They are also down about 55 per cent from the highs registered last summer because of a glut of supply on world markets.
On Wednesday, Barclays further cut its outlook for West Texas Intermediate, used as the North American benchmark for prices. Barclays expects WTI to average US$42 a barrel in 2015, down from its Dec. 1 forecast of $66. It expects WTI to rise to $57 a barrel in 2016.
Elsewhere on commodity markets, gold declined $1.80 while March copper edged up a penny to US$2.47 a pound after tumbling eight cents on Tuesday.
There were no major economic releases Wednesday while traders looked to the release Friday of the latest economic growth data. Statistics Canada is expected to report that gross domestic product rose by 0.1 per cent during the month.