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The Canadian dollar strengthened to a nearly three-month high against its U.S. counterpart on Tuesday as investors bet that Canada will reach a deal with the United States and Mexico to overhaul the North American Free Trade Agreement.

Canada’s top trade negotiator is joining her Mexican and U.S. counterparts in Washington in a bid to remain part of a revamped trilateral North American trade pact, as U.S. officials expressed optimism a deal could be reached this week.

“The market is signaling that a deal is at hand,” said Adam Button, currency analyst at ForexLive. “Canada has been strong armed into an agreement but at the end of the day a deal is better than no deal.”

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Canada sends about 75 per cent of its exports to the United States so its economy could benefit if talks with the United States and Mexico lead to a trilateral trade deal.

At 3:33 p.m. (1933 GMT), the Canadian dollar was trading 0.2 per cent higher at C$1.2935 to the greenback, or 77.31 U.S. cents. The currency touched its strongest since June 6 at C$1.2887.

The price of oil, one of Canada’s major exports, fell as some investors took profits on recent strong gains. U.S. crude oil futures settled 0.5 per cent lower at $68.53 a barrel.

Canadian government bond prices were lower across a steeper yield curve, with the two-year down 1 Canadian cent to yield 2.145 per cent and the 10-year falling 16 Canadian cents to yield 2.316 per cent.

Canada’s gross domestic product data for the second quarter is due on Thursday.

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