Loonie strengthens as global trade tensions ebb

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

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Tuesday, with the currency recovering from an earlier five-day low as easing of global trade tensions raised investor risk appetite.

The United States government will delay imposing a 10% tariff on certain Chinese goods, including laptops and cell phones, that had been scheduled to start next month, the Office of the U.S. Trade Representative said.

“The news that some parts of the tariff list will be delayed is constructive for risky assets and the Canadian dollar is taking its cue from that,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets

Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of trade or capital.

U.S. crude oil futures CLc1 settled 4% higher at $57.10 a barrel as easing trade tensions reduced global demand concerns.

At 3:10 p.m. (1910 GMT), the Canadian dollar CAD=D4 was trading 0.2% higher at 1.3222 to the greenback, or 75.63 U.S. cents. The currency's strongest intraday level was 1.3185, while it touched its weakest since last Thursday at 1.3293.

Canadian government bond prices were lower across a flatter yield curve in sympathy with U.S. Treasuries, as trade tensions eased and data showed a pick-up in U.S. inflation.

The two-year CA2YT=RR fell 9 Canadian cents to yield 1.376% and the 10-year CA10YT=RR was down 30 Canadian cents to yield 1.23%.

The 10-year yield fell 1.7 basis points further below the 2-year yield to a spread of -14.6 basis points, the curve’s largest inversion since June 2000.

Reporting by Levent Uslu; Editing by Marguerita Choy