The Canadian dollar closed up 0.44 of a cent to 77.75 cents US on Thursday, after fresh U.S. inflation data suggested a rate hike may be more distant.
The U.S. dollar has retreated from recent highs as economists and analysts speculate that the U.S. Federal Reserve will postpone any interest rate hike until next year.
That has the effect of boosting the loonie, as fewer investors are drawn to the U.S. currency when there is less potential for a rate hike in the near future. The Canadian dollar has been rising over the last three days.
"Market participants are beginning to re-assess the likelihood of a rate hike from the Federal Reserve in 2015 amidst recent lacklustre data releases," according to Rahim Madhavji, a currency trader with Knightsbridge FX.
On Thursday, the U.S. consumer price index showed consumer prices fell by 0.2 per cent, pulled down mainly by the low price of gasoline.
The Fed has set a target of two per cent core inflation before it moves on rates. But a strong U.S. dollar is pushing down the price of imports in the U.S. and discouraging sales of U.S. goods overseas.
The Canadian dollar wasn't getting any lift from oil prices, which declined again on Thursday after the U.S. Energy Information Administration showed oil in storage increased by 7.56 million barrels.
West Texas Intermediate crude fell 26 cents to $46.38 US a barrel, as investors absorbed the news about record crude inventories in the U.S.
The TSX also fell and was down 46 points at 13,828 in the afternoon on weak energy prices and a further fall in shares of Valeant, the Quebec drug company under scrutiny over drug pricing.