Canadian dollar edges higher as oil price steadies

The Canadian dollar firmed against its broadly stronger U.S. counterpart on Thursday as oil prices stabilized and signs emerged that the United States and China were working to resolve a trade war.

China has delivered a written response to U.S. demands for wide-ranging trade reforms, three U.S. government sources said, a move that could trigger more formal negotiations to resolve a trade war between the world’s top economies.

Canada is a major exporter of commodities, including oil, and runs a current account deficit, so its economy could benefit if prospects improve for the flow of trade or capital.

The price of oil stabilized after losing nearly 7 per cent over the previous three days, though concern over the prospect of an oversupplied market next year continued to weigh on prices despite OPEC’s message that it may cut crude output.

U.S. crude prices were up 0.2 per cent at $56.34 a barrel.

At 8:17 a.m., the Canadian dollar was trading 0.1 per cent higher at 1.3223 to the greenback, or 75.63 U.S. cents.

The loonie traded in a narrow range of 1.3210 to 1.3249. On Wednesday, the currency matched Tuesday’s intraday low of 1.3264, which was its weakest in nearly four months.

The U.S. dollar rose and traders bought into the safe-haven yen on Thursday after Britain’s Brexit deal with the European Union was plunged into uncertainty, spooking investors across currency markets.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year rose 5.5 cents to yield 2.25 per cent and the 10-year climbed 36 cents to yield 2.393 per cent.

The gap between Canada’s 30-year yield and its U.S. equivalent widened by 2.3 basis points to a spread of 90.3 basis points in favour of the U.S. bond, its widest since July 2011.

Canada and China will continue to work together towards an “eventual” free trade deal, Canadian Prime Minister Justin Trudeau said.