The Canadian dollar was up three-quarters of a cent and stock markets turned around after a speech by Federal Reserve chair Janet Yellen indicated the U.S. central bank will move cautiously on further rate hikes.

The loonie was up 0.71 of a cent to 76.54 cents US, mainly because the U.S. dollar fell against most other currencies.

Yellen's remarks that the Fed needs to "proceed cautiously" on rates were interpreted to mean there will not be a rate hike in April, eliminating the fear that had hung over the markets.

The Dow, which had fallen in early trading, reversed course at midday and was up 97 points to 17,633 at the close. That's its highest level this year.

The TSX, which slumped in the morning because of lower oil prices, also rose.It was up 24 points at 13,414.

"Markets are rightly taking Fed Chair Yellen's speech as being dominated by a dovish slant with the US dollar depreciating against most currencies and the front-end of the Treasury curve becoming dearer alongside slightly firmer stocks," said Scotiabank vice-president Derek Holt in a note to clients.

"We continue to think it is highly unlikely that the Fed will hike at the April 27 [meeting] and today's guidance may make a June hike a stretch." 

Oil prices dropping

West Texas Intermediate, the main North American contract, was down 86 cents to $38.52 US a barrel. Brent crude, the international oil contract, fell by 93 cents to $39.34 US a barrel.

Oil prices have risen more than 45 per cent since mid-February ahead of a meeting next month of the world's major producers to discuss an output freeze. But investors remain doubtful the players will reach an agreement and in the meantime, the worldwide glut of oil remains.

There also has been a sustained rally in commodity prices, with gold leading the pack, up $20 today to $1241 US an ounce.

That's good for Canadian markets, which have a heavy weighting to mining and resource stocks.

Since the beginning of the year:

  • Gold is up 16 per cent.
  • Silver, 10 per cent.
  • Platinum, 10 per cent.
  • Copper, 5 per cent. 

"Commodity prices have rebounded across a broad front since mid-February amid some easing in concern over the outlook for China's economy," said Scotiabank commodities expert Patricia Mohr.

She anticipates further strengthening of prices into 2016, as capital spending recovers and hedge funds look to move commodities prices up from their lowest point in a decade.