Canadian dollar edges higher ahead of Bank of Canada rate decision

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Wednesday, recovering from a recent decline ahead of an interest rate decision by the Bank of Canada and further talks to revamp the NAFTA trade pact.

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

Canada heads into talks in Washington on the North American Free Trade Agreement with determination not to back down on key issues, despite threats from U.S. President Donald Trump to retaliate against the Canadian economy unless Ottawa gives ground quickly.

The Bank of Canada, which has worried that trade uncertainty will hold back business investment, will wait at least until October before raising interest rates again, according to a Reuters poll taken late last week.

U.S. stock index futures fell as investors weighed the possibility of Trump following through on plans to impose a fresh round of U.S. tariffs on Chinese goods right after a public comment period ends on Thursday.

Canada runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

Still, the country’s currency is likely to rally over the coming months, according to foreign exchange strategists in a separate Reuters poll, who forecast that trade uncertainty will fade.

At 8:04 a.m. (1204 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent higher at C$1.3171 to the greenback, or 75.92 U.S. cents.

The currency, which touched its weakest in nearly seven weeks on Tuesday at C$1.3208, traded in a range of C$1.3165 to C$1.3207.

The price of oil, one of Canada's major exports, fell as a tropical storm hitting the U.S. Gulf coast weakened and moved away from oil-producing areas. U.S. crude CLc1 prices were down 1.4 percent at $68.93 a barrel.

Canada’s trade report for July is due at 8:30 a.m. (1230 GMT), while employment data for August is due on Friday.

Canadian government bond prices edged lower across the yield curve, with the 10-year CA10YT=RR falling 1 Canadian cent to yield 2.237 percent.

Reporting by Fergal Smith; Editing by Bernadette Baum