C$ strengthens as oil prices rise on output talks

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as crude oil prices rose on output talks, while domestic data pointed to a shift toward manufacturing as a driver of growth.

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

Oil prices rose as efforts led by Russia and Saudi Arabia to broker a deal to freeze production levels and ease a global glut turned to Iran. Its oil minister was to speak later Wednesday morning about the producers’ meeting.

U.S. crude CLc1 prices were up 1.72 percent to $29.54 a barrel.

Stock market gains added to support for the risk-sensitive commodity currency. [.N] [.TO]

Commercial borrowing by small businesses in Canada picked up in December on strength in sectors such as manufacturing and agriculture, data from PayNet showed.

At 9:32 a.m. EST (1432 GMT), the Canadian dollar CAD=D4 traded at C$1.3810 to the greenback, or 72.41 U.S. cents, stronger than Tuesday's official close of C$1.3881, or 72.04 U.S. cents.

The currency’s strongest level of the session was C$1.3784, while its weakest was C$1.3899. On Tuesday, it touched its strongest since Feb 4. at C$1.3707.

Canadian investors bought a record C$17.45 billion ($12.64 billion) worth of foreign securities in December, Statistics Canada said.

Canadian government bond prices were lower across the maturity curve, with the two-year CA2YT=RR price down 5.5 Canadian cents to yield 0.489 percent and the benchmark 10-year CA10YT=RR falling 42 Canadian cents to yield 1.201 percent.

The curve steepened as the spread between the 2-year and 10-year yields widened by 1.8 basis points to 71.2 basis points, indicating underperformance for longer-dated maturities. Last week, the spread touched its tightest since January 2015 at 63.9 basis points on the flight to safety.

Canadian Finance Minister Bill Morneau on Tuesday effectively conceded the government could not balance the budget as quickly as promised, saying the return to surplus would be achieved over the long term.

Also Tuesday, the British Columbia government projected a budget surplus of C$264 million in fiscal 2016-17 and unveiled measures to boost affordability in Vancouver’s hot housing market.

Reporting by Fergal Smith; Editing by Jeffrey Benkoe