TORONTO: The Canadian dollar, which outperformed its peers this month, firmed against the greenback on Thursday as hopes of progress on trade talks between the United States and China offset data showing a domestic economic contraction.

US President Donald Trump said China wanted to strike a deal by March 1 to avoid tariff increases and that he thought he could get one, but it may not be totally fleshed out in writing by then.

"I think the deal is not closed but at least the tone has been positive and that has helped the commodity currencies for the most part," said Alfonso Esparza, a senior currency analyst at OANDA.

Canada is running a current account deficit and exports many commodities, including oil, so its economy could benefit from a pickup in the global flow of trade or capital.

Canada's gross domestic product fell by 0.1 percent in November from October, matching estimates, on declines in the wholesale trade sector, as well as finance and insurance, Statistics Canada said.

Still, the Bank of Canada has said interest rates will need to rise further over time in order to achieve its inflation target.

"I don't think the Bank of Canada needs to tweak its monetary policy or its tightening bias considerably as opposed to what we have seen with the Fed," Esparza said On Thursday, the Federal Reserve signaled a potential end to its interest rate hike cycle.

Stubbornly low wage growth in Canada should start picking up later this year as the economy overcomes a slowdown caused by weak oil prices and housing market softness, Carolyn Wilkins, a senior deputy governor at the Bank of Canada, said on Thursday.

At 4:28 p.m. (2128 GMT), the Canadian dollar was trading 0.2 percent higher at 1.3126 to the greenback, or 76.18 US cents. The currency, which on Wednesday touched its strongest level in more than two months at 1.3119, traded in a range of 1.3121 to 1.3166.

For the month, the loonie advanced 4 percent, the best performance among G10 currencies, helped by a rebound in oil prices. It declined 7.8 percent in 2018.

U.S. crude oil futures touched a two-month high on Thursday before settling 0.8 percent lower at $53.79 a barrel.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries, with the 10-year rising 29 Canadian cents to yield 1.879 percent.