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Canadian dollar closes lower; Fed minutes show central bank mulls exit strategy

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TORONTO - The Canadian dollar closed lower Wednesday amid declining metal prices and reassurance from the U.S. Federal Reserve about when it might hike rates.

The loonie was off 0.13 of a cent to 91.62 cents US.

Minutes of the Federal Reserve’s late April meeting showed that officials discussed how to eventually tighten monetary policy and move rates away from near zero, where they've been since the financial crisis of 2008.

The minutes disclosed that a number of Fed officials said it would be important for the U.S. central bank to "communicate still more clearly about the Fed’s policy intentions as the time of the first increase in the federal funds rate moves closer."

Fed chairwoman Janet Yellen noted earlier this month that the U.S. job market remains "far from satisfactory" and inflation below the Fed's target rate. Yellen said that she expects low borrowing rates will continue to be needed for a "considerable time."

On the commodity markets, July crude in New York gained $1.74 to US$104.07 a barrel.

July copper dipped two cents to US$3.12 a pound, while June gold faded $6.50 to US$1,288.10 an ounce.

The economic calendar was light Wednesday, but markets are looking ahead to two major economic reports this week.

The March reading on retail sales comes out Thursday and economists are looking for a rise of 0.3 per cent.

On Friday, markets will look to the latest inflation data and, in turn, what effect the reading could have on the Bank of Canada's interest rate announcement in early June.

"Friday's inflation print will be a core input for judging BoC policy going forward," observed Camilla Sutton, chief FX strategist, managing director, Scotiabank Global Banking and Markets.

"Currently the market is pricing in no chance of an interest rate cut or hike in the next 12-months."

Economists expect the inflation data will show that the consumer price index rose two per cent year-over-year in April, up from the 1.5 per cent reading registered in March.

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