C$ notches two-week high as risk appetite rises

TORONTO (Reuters) - The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Thursday as worries receded of an escalated trade dispute between the United States and China and as the greenback broadly fell.

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

Signs of movement in the U.S.-China trade stand-off and a bumper interest rate hike in emerging market trouble spot Turkey sent world shares higher as risk appetite returned.

Canada exports many commodities and runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

The U.S. dollar weakened against a basket of major currencies following data that showed U.S. consumer prices rose at a slower pace than analysts expected.

At 9:13 a.m. (1313 GMT), the Canadian dollar was trading 0.1 percent higher at C$1.2986 to the greenback, or 77.01 U.S. cents. The currency touched its strongest since Aug. 30 at C$1.2976.

The loonie has been boosted this week by higher oil prices and optimism that a deal to renew the North American Free Trade Agreement would be reached.

Canadian Foreign Minister Chrystia Freeland on Wednesday said officials needed to do more work before she could hold fresh talks with the United States on renewing NAFTA as time runs out to reach a deal.

The price of oil, one of Canada’s major exports, slipped back from four-month highs as investors focused on the risk that emerging market crises and trade disputes could dent demand even as supply tightens.

U.S. crude prices were down 1.3 percent at $69.47 a barrel.

New home prices in Canada increased by 0.1 percent in July from the prior month, matching the forecast of analysts. The year-over-year increase slowed to 0.5 percent from 0.8 percent in June.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The 10-year climbed 15 Canadian cents to yield 2.318 percent.

On Wednesday, the 10-year yield touched its highest in more than one month at 2.347 percent.

Reporting by Fergal Smith; Editing by Susan Thomas