Canada said a deal to salvage the trilateral North American Free Trade Agreement (NAFTA) is possible by a Friday deadline, but it will be hard work to resolve specific issues as talks with the United States entered a second day.

"There is some modest confidence in the prospect of a deal ahead of Friday," said Eric Theoret, a currency strategist at Scotiabank. "I think the market is taking a wait and see approach and not ready to commit at this time."

Canada sends about 75 percent of its exports to the United States, so its economy could benefit if a trilateral trade deal with the US and Mexico is reached.

At 2:42 p.m. (1842 GMT), the Canadian dollar was trading 0.1 percent higher at C$1.2923 to the greenback, or 77.38 US cents. The currency, which notched a nearly three-month high on Tuesday at C$1.2887, traded in a range of C$1.2904 to C$1.2966.

The modest gain for the loonie came ahead of Canadian gross domestic product data on Thursday that could help guide expectations for another interest rate hike from the Bank of Canada as soon as next week.