The price of oil, one of Canada's major exports, rose to a nearly four-week high despite fading optimism of a trade deal between the United States and China. US crude oil futures settled 0.4 percent higher at $52.59 a barrel.

Oil has rebounded about 24 percent since slumping in December to an 18-month low.

"One thing that is going for Canada right now is oil prices, that a bit of a correlation is coming back, that with the rally in the oil market we are benefiting," said Hosen Marjaee, senior portfolio manager at Manulife Asset Management.

The three-month correlation between the Canadian dollar and oil has climbed to nearly 90 percent, according to Refinitiv Eikon data, indicating that the currency and the commodity move mostly in the same direction. For some months in 2018, the correlation was negative.

At 4:14 p.m. EST (2114 GMT), the Canadian dollar was trading 0.2 percent lower at 1.3235 to the greenback, or 75.56 US cents. The currency traded in a range of 1.3203 to 1.3260.

On Wednesday, the loonie touched a five-week low at 1.3180 as the Bank of Canada held interest rates steady, as expected, but said more increases would be necessary even though low oil prices and a weak housing market will harm the economy in the short term.