TORONTO (Reuters) - 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 percent 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 CLc1 prices were up 0.2 percent at $56.34 a barrel.
At 8:17 a.m. (1317 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent 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 .DXY 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 CA2YT=RR rose 5.5 Canadian cents to yield 2.25 percent and the 10-year CA10YT=RR climbed 36 Canadian cents to yield 2.393 percent.
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 favor of the U.S. bond, its widest since July 2011.
Canada and China will continue to work together toward an “eventual” free trade deal, Canadian Prime Minister Justin Trudeau said.
Reporting by Fergal Smith; Editing by Susan Thomas