Canadian dollar steadies near a one-year low as oil prices rise

TORONTO (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Wednesday as oil prices rose but the currency held near its weakest level in nearly one year amid uncertainty about the outlook for global trade.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo

At 9:07 a.m. EDT (1307 GMT), the Canadian dollar CAD=D4 was trading nearly unchanged at C$1.3286 to the greenback, or 75.27 U.S. cents. The currency touched its weakest level since June 22, 2017, at C$1.3312.

The price of oil, one of Canada’s major exports, was supported by reports of a drop in U.S. commercial crude inventories and the loss of storage capacity in Libya.

U.S. crude CLc1 prices rose 1.2 percent to $65.85 a barrel.

An escalating trade conflict between the United States and China kept investors from buying higher-yielding currencies and markets braced for growing volatility.

Canada runs a current account deficit so its currency could suffer if volatility rises. The country is in a trade feud with the United States and also in slow-moving talks with the U.S. and Mexico to revamp the North American Free Trade Agreement.

The Canadian government believes a deal to update the NAFTA trade pact is possible despite a U.S. move to impose tariffs on Canadian and Mexican steel and aluminum, Foreign Minister Chrystia Freeland said on Tuesday.

Canadian government bond prices were mixed across the yield curve, with the two-year CA2YT=RR flat to yield 1.846 percent and the 10-year CA10YT=RR rising 5 Canadian cents to yield 2.156 percent.

On Tuesday, the 10-year yield touched its lowest in more than two months at 2.146 percent.

Canadian inflation data for May and the April retail sales report are due out on Friday.

Reporting by Fergal Smith; Editing by Bill Trott