The Canadian dollar rose to a four-month high as the nation joined the U.S. and Mexico in a trade deal to replace the North American Free Trade Agreement.

The loonie strengthened as much as 0.7 per cent to $1.2814 against the U.S. currency, while Mexico’s peso rose for a fourth day. The new trade deal will be called the U.S.-Mexico-Canada Agreement, or USMCA, according to a joint statement from U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland.

“The Canadian dollar is reacting favorably because the agreement was seen harder to reach,’’ said Kengo Suzuki, chief foreign-exchange strategist at Mizuho Securities Co. in Tokyo. “The trade agreement will enable Canada to benefit from the buoyant growth in the U.S. economy. With this, a global trade war is scaling down to the bilateral trade conflict between the U.S. and China.’’

Read the full text of the new trade pact here

The deal involves improved access to Canada’s dairy market for U.S. farmers, stronger intellectual property provisions, and tighter rules of origin for car production, according to two senior Trump administration officials who spoke to reporters on a briefing call on condition of anonymity. U.S. President Donald Trump had threatened auto tariffs if a deal couldn’t have been reached.

“I’m not entirely sure anyone was expecting a deal before this deadline, so it’s not too surprising” to see the Canadian dollar rallying, said Viraj Patel, a currency analyst at ING Groep NV in London.

The Canadian dollar also got a boost from a report that Royal Dutch Shell and its four partners have agreed to invest in a multibillion-dollar liquefied natural gas project in western Canada. The deal would mark the nation’s largest infrastructure project.