The Canadian dollar fell to a two-week low versus the greenback on Thursday, but ahead of a speech by Bank of Canada Governor Stephen Poloz, fared better than other G10 currencies as worries eased that a NAFTA trade deal would not be reached.
Criticism on Wednesday by U.S. President Donald Trump that talks to modernize the North American Free Trade Agreement were moving too slowly had helped send the loonie to its weakest intraday level since Sept. 11 at $1.3083.
But Canada shrugged off the complaint and made clear it had to keep negotiating as long as there was a chance of success.
“You have had the market do a bit of a rethink because I think the path forward on a bilateral U.S.-Mexico deal is still pretty challenging,” said Eric Theoret, a currency strategist at Scotiabank.
Trump has already concluded a text with Mexico, the third country in NAFTA, and is threatening to leave out Canada unless it signs up by Sunday.
Canada sends about 75 per cent of its exports to the United States, so its economy could be hurt if a deal is not reached or if Trump follows through on a threat to impose tariffs on Canadian autos.
At 4:01 p.m. (2001 GMT), the Canadian dollar was trading 0.2 per cent lower at $1.3047 to the greenback, or 76.65 U.S. cents, the smallest decline against the U.S. dollar among G10 currencies.
“I still think there is a reasonable probability of a deal this weekend,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets. “It always gets the most intense right at the end on any type of negotiation because people actually have to move red lines.”
The U.S. dollar climbed against a basket of currencies one day after the U.S. Federal Reserve raised interest rates for the third time this year.
The Bank of Canada has also been hiking rates this year. Poloz on Thursday could provide clues on prospects of another hike in October. The central bank will release his prepared remarks at 5:45 p.m. (2145 GMT).
The price of oil, one of Canada’s major exports, was supported by the prospect of a shortfall in global supply once U.S. sanctions against major crude exporter Iran come into force.
U.S. crude oil futures settled 0.8 per cent higher at $72.12 a barrel.
Canadian government bond prices were mixed across the yield curve, with the 10-year rising 1 Canadian cent to yield 2.415 per cent.