TORONTO: The Canadian dollar extended its four-day advance against the greenback on Tuesday, as a rally in crude prices offset earlier losses due to data that showed Canada's trade deficit widened in August as exports slumped.
Exports fell by 3.6 percent, the largest decline since January 2012, as exports of energy products sank 14.7 percent. The slump, which comes following two months of robust growth, pushed the country's trade deficit to C$2.53 billion, far off the C$1.2 billion economists had forecast.
The loonie began recouping initial losses as market participants digested the details before edging higher. Economists and analysts noted that the longer term trends, particularly in terms of volume - a key measure for the Bank of Canada, remained "constructive".
The price of crude, a significant Canadian export, rose more than 2 percent on signs that the world's biggest crude producers may act jointly to support prices, which have plunged by half over the past year.
At 9:54 a.m. EDT (1354 GMT), the Canadian dollar was trading at C$1.3071 to the US dollar, or 76.51 US cents, marginally firmer than the Bank of Canada's official close of C$1.3087, or 76.41 US cents.
The currency, which was weaker than most of its counterparts, has traded between C$1.3065 and C$1.3134 so far in the session.
The US trade deficit also widened as exports took a hit, hurt by a softening global economy. The data for August could spur further expectations that the Federal Reserve's plans to hike interest rates will be pushed back. The trade deficit swelled by 15.6 percent to $48.3 billion in August.
Canada's employment data for September will be due on Friday at 8:30 a.m. EDT.
US crude prices were up 2.31 percent to $47.33, while Brent crude added 2.60 percent to $50.53.
Canadian government bond prices were mixed across the maturity curve, with the two-year price flat to yield 0.513 percent and the benchmark 10-year falling 14 Canadian cents to yield 1.458 percent.
The Canada-US two-year bond spread was -10.0 basis points, while the 10-year spread was -61.2 basis points.
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