The Canadian dollar rose against its US counterpart on Thursday as firmer stock prices and optimism about a North American Free Trade Agreement (NAFTA) trade deal offset data showing the domestic economy unexpectedly contracted at the start of the year. At 4 pm EDT (2000 GMT), the Canadian dollar was trading 0.3 percent higher at C$1.2883 to the greenback, or 77.62 US cents. The currency's strongest level of the session was C$1.2862, while it touched its weakest since Friday at C$1.2940.
For the quarter, the loonie was headed for a 2.3 percent decline, which would be its deepest since the final quarter of 2016. Canadian government bond prices were higher across the yield curve, with the two-year up 5.5 Canadian cents to yield 1.776 percent and the 10-year rising 24 Canadian cents to yield 2.092 percent.
The gap between the 2-year yield and its US equivalent widened by 1.4 basis points to a spread of -49.4 basis points. Canada's bond market will be closed on Friday for Good Friday. The Canadian economy shrank by 0.1 percent in January, short of analysts' estimates for a 0.1 percent increase, in a clear sign that first-quarter growth is likely to be weaker than the Bank of Canada had predicted.
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