Loonie rises amid Fed tapering decision, worries over Iraq insurgency

TORONTO - The loonie ended Wednesday higher amid more tapering news from the U.S. Federal Reserve.

The Canadian dollar rose 0.12 of a cent to 92.17 cents US.

The Fed has announced it will cut its monthly bond purchases by US$10 billion to US$45 billion in July, citing an improving U.S. job market. This will be the fifth cut in the purchases since December as the Fed slows the support it's providing the American economy. The stimulus has helped keep borrowing rates low and supported equity markets.

The Fed did not give any date on when it might start raising its benchmark short-term rate, even though most economists think an increase is at least a year away despite signs of rising inflation.

Meanwhile, commodities dipped amid developments from Iraq.

Iraqi security forces battled with insurgents targeting the country's main oil refinery and claimed to regain partial control of a city near the Syrian border in an attempt to blunt the offensive by militants, who diplomats fear may have abducted some 100 foreign workers.

The Beiji refinery accounts for a little more than a quarter of the country's entire refining capacity, all of which goes toward domestic consumption for things like gasoline, cooking oil and fuel for power stations. Any lengthy outage at Beiji risks long lines at the gas pump and electricity shortages.

There has also been concern over possible disruption to oil exports by Iraq, the No. 2 producer in the Organization of Petroleum Exporting Countries.

However, Macan Nia, manager of the portfolio advisory group at Manulife Asset Management, said although the al-Qaida inspired group has gained a lot of ground over the last few days, he doesn't think things will be as easy as it head towards Baghdad and the south of Iraq, home of most of the country's oil production.

"It was a lot easier for them in northern Iraq, but as they approach Baghdad, there will be a lot more resistance in the south" from Shiite Iraqis and possibly Iranians and even the Americans, he said.

"The price of oil increase over the last week will be short term as (the militant group) faces a lot more resistance from a more powerful source."

The July crude contract fell 39 cents to US$105.97 a barrel. August gold bullion gained 70 cents to US$1,272.70 an ounce and while July copper was unchanged at US$3.06 a pound.

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Note to readers: This is a corrected story: A previous version incorrectly said the loonie closed at 91.17 cents US