Canadian dollar little changed as investor caution offsets oil rally

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Thursday even as oil prices rose, with investors wary before a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

Trump faces pressure to deliver trade concessions for some of his most fervent supporters and prevent a crisis with North Korea from spiraling out of control.

Signs that the U.S. Federal Reserve might start paring asset holdings also weighed on risk appetite as did evaporating hopes of an early U.S. fiscal stimulus program.

Commodity-linked currencies, such as the loonie, tend to underperform when investors turn less optimistic about the economic outlook.

Prices of oil, one of Canada’s major exports, were on track for a fourth consecutive daily gain after recovering from losses triggered by record high U.S. crude inventories.

U.S. crude CLc1 prices were up 0.92 percent to $51.62 a barrel.

At 9:42 a.m. ET (1342 GMT), the Canadian dollar CAD=D4 was trading at C$1.3425 to the greenback, or 74.49 U.S. cents, slightly stronger than Wednesday's close of C$1.3427, or 74.48 U.S. cents.

The currency traded in a range of C$1.3418 to C$1.3451.

The loonie on Tuesday hit a nearly three-week low at C$1.3455, pressured by domestic data showing an unexpected trade deficit.

On the data front, Statistics Canada reported on Thursday that the value of Canadian building permits dropped by 2.5 percent in February from January.

Canadian government bond prices were mixed across the yield curve, with the two-year CA2YT=RR down half a Canadian cent to yield 0.723 percent and the 10-year CA10YT=RR rising 12 Canadian cents to yield 1.547 percent.

On Tuesday, the 10-year yield touched its lowest in four months at 1.545 percent.

Canada's employment report for March is due on Friday. Economists forecast that the country added just 5,000 jobs after a strong run of employment gains. ECONCA

Reporting by Fergal Smith Editing by W Simon