TORONTO: The Canadian dollar strengthened against its US counterpart on Tuesday as the greenback broadly fell, while investors turned their attention to the resumption of NAFTA renegotiations later this week.
The US dollar retreated against a basket of major currencies after strong German economic growth data drove the euro to a three-week high.
US, Canadian and Mexican negotiators hope to make modest progress in the next round of North American Free Trade Agreement talks in Mexico City this week.
NAFTA working groups are due to begin meeting from Wednesday. On Friday, talks will formally get underway through Nov. 21.
At 9:23 a.m. ET (1423 GMT), the Canadian dollar was trading at C$1.2711 to the greenback, or 78.67 US cents, up 0.2 percent.
The currency's strongest level of the session was C$1.2701, while it touched its weakest since last Wednesday at C$1.2755.
The gain for the Canadian dollar came despite the third straight day of declining prices of oil, one of Canada's major exports.
US crude prices were down 0.37 percent at $56.55 a barrel.
The Canadian dollar is unlikely to recapture its tight link with the price of oil even as the interest rate outlook settles, given that crude trades are far removed from levels needed to affect investment in Canada's energy sector, economists and strategists say.
Speculators have cut bullish bets on the Canadian dollar, data from the US Commodity Futures Trading Commission and Reuters calculations showed on Monday.
As of Nov. 7, Canadian dollar net long positions had slipped to 50,889 contracts from 57,839 a week earlier.
Canada's manufacturing sales data for September is due on Thursday and the October inflation report will be released on Friday.
Economists expect the annual inflation rate to have cooled to 1.4 percent in October, which could give the Bank of Canada room to take its time raising interest rates after two back-to-back hikes earlier this year.
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