TORONTO -- The Canadian dollar closed lower Monday while the greenback gained strength in the wake of data showing Japan has fallen back into recession.

The loonie was down 0.15 of a cent to 88.53 cents US as the world's third-largest economy contracted at a 1.6 per cent annual pace as housing and business investment dropped following a sales tax hike.

Japan emerged from its last recession just as Prime Minister Shinzo Abe took office in December 2012, saying he would end two decades of stagnation with a combination of loose monetary policy, strong fiscal spending and "drastic" economic reforms -- a strategy dubbed "Abenomics."

But consumer spending in Japan is faltering as the population shrinks and grows older. Japanese manufacturers have lost their leading edge in innovation while shifting production to cheaper locations offshore.

Energy is also a major focus for the commodity-sensitive Canadian dollar this week after concerns about demand and global oversupply pushed crude to below US$75 for the first time in four years. On Monday, the December contract in New York was down 18 cents to US$75.64 US.

Also, the Republican-controlled U.S. House of Representatives passed legislation in favour of building TransCanada's (TSX:TRP) Keystone XL pipeline on Friday. And supporters in the Democratic-run Senate predicted they will get the 60 votes needed to pass it this week. However, President Barack Obama could veto the bill and it is highly uncertain whether the Senate or House will have the two-thirds majorities that would be needed to override a presidential veto.

Elsewhere on commodity markets, December gold faded $2.10 to US$1,183.50 while December copper edged one cent lower to US$3.04.

On the economic front, it is expected that falling energy prices will manifest themselves in the latest inflation readings coming out this week.

Statistics Canada is expected to report Friday that its October Consumer Price Index declined by 0.2 per cent following a slight 0.1 per cent rise in September. Gasoline prices fell over one per cent annually through October.

Economists expect to see the U.S. CPI ease by 0.1 per cent for October.