TORONTO, Dec 5 (Reuters) - The Canadian dollar strengthened to a six-week high against its U.S. counterpart on Tuesday after data showed a rebound in the country's exports one day before an interest rate decision by the Bank of Canada.
Canada's trade deficit narrowed to C$1.47 billion in October from a revised C$3.36 billion in September as exports increased after four consecutive monthly declines. Economists had forecast a deficit of C$2.70 billion. report, combined with last week's stellar employment report, will be looked favorably upon by the data dependent Bank of Canada," said Dina Ignjatovic, an economist at TD Bank in a research note.
Data on Friday showed that Canada's economy added nearly 80,000 jobs in November.
Still, economists expect the Bank of Canada to leave its benchmark interest rate on hold at 1 percent on Wednesday due to a number of uncertainties that could affect the domestic economy, including renegotiation of the North American Free Trade Agreement.
The central bank raised rates in July and September for the first time in seven years.
At 9:36 a.m. ET (1436 GMT), the Canadian dollar CAD=D4 was trading at C$1.2661 to the greenback, or 78.98 U.S. cents, up 0.1 percent.
The currency touched its strongest since Oct. 24 at C$1.2624.
The loonie advanced despite a drop in the price of oil, one of Canada's major exports.
U.S. crude CLc1 prices were down 0.12 percent at $57.4 a barrel as investors took profits in the wake of a pact by major producers to extend output cuts. government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 0.5 Canadian cent to yield 1.553 percent and the 10-year CA10YT=RR falling 5 Canadian cents to yield 1.931 percent.
The gap between Canada's 2-year yield and its U.S. equivalent widened by 4.2 basis points to a spread of -27 basis points, as gains on Wall Street helped underpin U.S. Treasury yields.