The Canadian dollar gained more than a cent on Thursday as oil prices recovered from their worst one-day plunge since September.

The dollar closed at 70.03 cents US, up 1.02 cents from Wednesday's close.

The main catalyst for the loonie was a bounce back in oil, which lost more than seven per cent on Wednesday. The mood was much brighter for crude Thursday, however, as the main oil North American contract rose by $1.30 US to $29.70 US a barrel.

The increase in oil prices came despite a report showing a big jump in U.S. oil inventories last week, up four million barrels versus the 2.2 million that had been expected.

The West Texas Intermediate contract was switching from February delivery to March delivery on Thursday. There are often large changes in oil prices on the day of the switch.

The energy-laden TSX was buoyed by oil's rebound too, with the S&P/TSX composite index up 192 points to 12,035 points at the close of the trading day.

The Bank of Canada's decision not to further cut interest rates also helped buoy the dollar. Traders had discounted the dollar in recent days in anticipation of a rate cut, but the central bank did not agree that the economy was in such poor shape it needed new stimulus.

"Steady monetary policy has been a boon to the Canadian dollar, as the Bank of Canada has taken a wait-and-see approach to the beginning of 2016," said Rahim Madhavji, a foreign currency trader with KnightsbridgeFX in Toronto. 

Madhavji said the focus of the market will likely shift to Finance Minister Bill Morneau and the Liberal government as traders anticipate a stimulus budget.

The loonie is still at its lowest levels since 2004, pushing up the cost of everything from gasoline to fresh fruit and vegetables.