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The Canadian dollar edged higher against its U.S. counterpart on Wednesday as the signing of a Phase 1 trade agreement between the United States and China helped underpin investor risk appetite.

Key world stock market indexes climbed to new records on hopes that the deal would reduce trade tensions.

“It’s a risk-on event for the market and the loonie is obviously benefiting as a result of it,” said Rahim Madhavji, president at KnightsbridgeFX.com.

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Canada runs a current account deficit and is a major exporter of commodities, including oil, so its economy could benefit from a pickup in the global flow of trade and capital.

At 3:46 p.m., the Canadian dollar was trading 0.1 per cent higher at 1.3047 to the greenback, or 76.65 U.S. cents. The currency, which last Thursday hit a near two-week low at 1.3104, traded in a range of 1.3035 to 1.3078.

The potential lessening of trade tensions comes ahead of an interest rate decision next week from the Bank of Canada.

“It’s another reason to keep the steady (interest rate) profile that has been going on for the foreseeable future, till more data comes in,” Madhavji said.

The central bank has kept its benchmark interest rate on hold at 1.75 per cent since October 2018 despite easing from some major global peers, such as the Federal Reserve and the European Central Bank.

Canadian home sales fell 0.9 per cent in December from the previous month, breaking a streak of monthly gains that began last March, the Canadian Real Estate Association said.

U.S. crude oil futures settled 0.7 per cent lower at $57.81 a barrel, pressured by data showing big increases in U.S. refined products.

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Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year rose 5 cents to yield 1.639 per cent and the 10-year was up 45 cents to yield 1.536 per cent.

Canada issued a $3 billion five-year global bond to add to its foreign exchange reserves. The bond was issued at 6 basis points above the yield on the equivalent maturity U.S. Treasury note, which was the best pricing ever for a Canadian five-year global bond, according to the Department of Finance.

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