TORONTO - The Canadian dollar strengthened to a one-week high against its U.S. counterpart on Tuesday as oil and stock prices steadied after steep declines the day before, while investors weighed potential progress toward a NAFTA trade deal.
The United States, Mexico and Canada have made significant advances on reworking the North American Free Trade Agreement and ministers will meet in the coming days to determine the scope to agree on the basics of a deal, Mexico's economy minister said on Monday.
U.S. stocks were boosted by gains in beaten-down technology companies.
Canada's commodity-linked currency tends to be sensitive to movement in stock prices which are influenced by the health of the global economy. The price of oil, one of Canada's major exports, rose after its biggest one-day fall in almost a year the previous day, although higher Russian output and Saudi Arabia possibly cutting its selling prices acted as a drag.
U.S. crude prices were up 0.4 per cent at US$63.24 a barrel. At 9:16 a.m. EDT (1316 GMT), the Canadian dollar was trading 0.5 per cent higher at $1.2852 to the greenback, or 77.81 U.S. cents. The currency's weakest level of the session was $1.2924, while it touched its strongest since March 27 at $1.2829.
Fiscal stimulus from major provinces is set to give Canada's economy a shot in the arm, which could boost the case for further Bank of Canada interest rate hikes over the coming months despite slow growth at the start of the year, economists said on Monday.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as demand faded for safe-haven assets. The two-year fell 1.7 cents to yield 1.787 per cent and the 10-year declined 10 cents to yield 2.127 percent. On Friday, the 10-year yield touched its lowest intraday since Jan. 4 at 2.073 per cent. Canadian trade data for February is due on Thursday and the March employment report is due on Friday.
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