The Canadian dollar hit a new 31-year high Friday, closing in on the $1.04 US level, as inflation figures came in higher than expected.

The loonie finished at $1.0355 US, after gaining 0.85 of a cent. The loonie, which has risen 20 per cent against the U.S. dollar this year, has not closed that high since June 1976.

Economists pointed to the higher-than-expected month-over-month increase in the core rate of inflation for much of Friday's strength in the loonie.

From August to September, core inflation rose by 0.4 per cent, while economists had been looking for an increase of 0.2 per cent.

Following comments earlier in the week from the Bank of Canada that seemed somewhat dovish on the direction for inflation, some investors had been looking for a possible interest rate cut. But the higher-than-expected reading in the core rate has now put that in doubt.

One analyst told CBC News that following Friday's inflation report, the chance of a rate cut was increasingly being discounted. 

The loonie also drew strength from the U.S. dollar's continuing weakness against major world currencies. The greenback hit another all-time low against the euro in Friday trading.