Canadian dollar steadies as investors weigh officials’ trade comments

The Canadian dollar steadied near a six-week ​high against its U.S. counterpart on ‌Monday as oil prices tumbled and investors weighed positive signals on prospects of a trade deal between the U.S. and Canada.

The loonie was ⁠trading nearly ​unchanged at 1.3975 per US dollar, or 71.56 US cents, after touching on Friday its strongest intraday level since September 16 at 1.3940.

U.S. President Donald Trump said on Sunday ​that his administration has the “concept” of a ‌new trade deal with Canada while Prime Minister Mark Carney said the two leaders had a good conversation on the future of trade between their countries.

The imposition of tariffs on Canada has emerged as an issue ‌in some ​northern U.S. border ‌states like Michigan and Maine before U.S. midterm elections on Tuesday.

“Headlines ​have been constructive, following positive comments from ⁠both U.S. and Canadian officials on the topic of trade,” ⁠Shaun Osborne and Eric Theoret, FX strategists at Scotiabank, said in a ​note.

“Fundamentally, the CAD remains well supported by narrowing U.S.-Canada yield spreads which have delivered the bulk of its recent gains,” the strategists said.

The gap between Canada’s 2-year yield and the U.S. equivalent was trading at about 129 ⁠basis points in favor of the U.S. note. Last month, the gap was as wide as 161 basis points.

The Bank of Canada last week raised its benchmark interest rate by 25 basis points to 2.50 per cent, its first hike in three ⁠years, out of concern that soaring energy ​prices could drive broader inflation.

U.S. crude oil futures fell 7.8 per cent ⁠to $96.01 a barrel as talks between Iranian and Qatari officials lifted hopes for an end to ‌the US-Israeli war with Iran and stabilization of Middle East crude supply. ​Oil is one of Canada’s major exports.

Canadian bond yields fell across the curve, tracking moves in U.S. Treasuries. The 10-year was down 5.5 basis points at 3.744 per cent, after ​earlier touching its lowest level since September 3 at 3.740 per cent.