The Canadian dollar hits six-week high as trade tensions ebb, oil climbs

TORONTO (Reuters) - The Canadian dollar strengthened to a six-week high against its U.S. counterpart on Tuesday as higher oil and stock prices signaled easing investor concerns about an escalating U.S.-China trade row.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. The Canadian dollar strengthened against the U.S. dollar on Friday after Canadian CPI data showed an increase in core inflation. REUTERS/Mark Blinch

Investor optimism grew that a trade dispute between the United States and China might be resolved without greater damage to the global economy after President Xi Jinping promised to open China’s economy further and lower import tariffs on products including cars.

Canada’s commodity-linked economy could be hurt if global trade slows.

U.S. crude CLc1 prices were up 1.8 percent to $64.55 a barrel, building on Monday's rally.

At 9:15 a.m. EDT (1315 GMT), the Canadian dollar CAD=D4 was trading 0.3 percent higher at C$1.2658 to the greenback, or 79.00 U.S. cents. The currency touched its strongest level since Feb. 26 at C$1.2651.

Gains for the loonie came after the Bank of Canada said in a report on Monday that Canadian companies remained optimistic about sales growth despite trade uncertainties.

Last week, stronger-than-expected domestic jobs data and investor optimism over a deal to revamp the North American Free Trade Agreement helped boost the loonie by 0.9 percent.

The Canadian government said it was considering all options on the Trans Mountain pipeline expansion, including a possible investment of public funds to ensure construction goes ahead.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 3.5 Canadian cents to yield 1.815 percent and the 10-year CA10YT=RR falling 27 Canadian cents to yield 2.176 percent.

The gap between Canada’s 10-year yield and its U.S. equivalent narrowed by 2.4 basis points to a spread of -62.1 basis points.

The value of Canadian building permits dipped by 2.6 percent in February, in part due to lower construction intentions for single-family homes in Ontario, Statistics Canada said.

Reporting by Fergal Smith; Editing by Bernadette Baum