TORONTO: The Canadian dollar edged lower against its broadly stronger US counterpart on Thursday as oil and stock prices fell following a flare-up in the trade tensions between the United States and China.
Stocks fell globally, while the US dollar rose against a basket of major currencies and the Chinese yuan after US administration officials said on Wednesday that President Donald Trump was proposing a 25 percent tariff on $200 billion worth of Chinese imports.
Canada has its own trade feud with the United States and runs a current account deficit, and its economy could be hurt if the flow of trade or capital slows.
The price of oil, one of Canada's major exports, was pressured by trade tensions and a surprise increase in US crude inventories. US crude prices were down 0.4 percent at $67.36 a barrel.
At 9:05 a.m. EDT (1305 GMT), the Canadian dollar was trading 0.1 percent lower at C$1.3021 to the greenback, or 76.80 US cents. The currency traded in a narrow range of C$1.2996 to C$1.3039.
On Wednesday, the loonie touched its strongest in nearly seven weeks at C$1.2975. It was boosted by recent domestic data that has added to bets for another interest rate hike this year from the Bank of Canada and signs of progress in talks to update a trade pact between Canada, the United States and Mexico.
The United States and Mexico are getting close to a deal on the key issue of autos content rules at negotiations to renew the North American Free Trade Agreement, Mexican and Canadian officials said on Wednesday.
Canada sends about 75 percent of its exports to the United States. Its trade data for June is due on Friday.
Canadian government bond prices were higher across much of the yield curve in sympathy with US Treasuries. The 10-year rose 5 Canadian cents to yield 2.364 percent.
On Wednesday, the 10-year yield touched its highest in more than two months at 2.378 percent.
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