* Canadian dollar at C$1.2986, or 77.01 U.S. cents
* Loonie touches strongest since Thurs at C$1.2976
* Oil prices climb 0.9 percent
* Bond prices lower across the yield curve
By Fergal Smith
TORONTO, March 21 (Reuters) - The Canadian dollar strengthened to a six-day high against its U.S. counterpart on Wednesday, buoyed by higher oil prices and a report that the U.S. had dropped one of its contentious demands in the renegotiation of the NAFTA trade deal.
President Donald Trump's administration has dropped a demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 percent U.S. content, The Globe and Mail reported. does remove some source of uncertainty," said Alvise Marino, FX strategist at Credit Suisse (SIX:CSGN) in New York. "It's still too early for the BoC to meaningfully change its view on this front."
The Bank of Canada has been worrying that uncertainty over the future of the North American Free Trade Agreement may weigh on the economy. Comments last week from Governor Stephen Poloz have reinforced expectations the central bank will take its time raising rates after hiking them three times since last July. price of oil, one of Canada's major exports, notched its highest in six weeks after a surprise decline in U.S. inventories and as concern persist over possible disruption to Middle East supply. crude CLc1 prices were up 0.9 percent at $64.09 a barrel.
At 8:58 a.m. ET (1258 GMT), the Canadian dollar CAD=D4 was trading 0.7 percent higher at C$1.2986 to the greenback, or 77.01 U.S. cents. It touched its strongest since Thursday at C$1.2976.
Gains for the loonie came even as investors braced for a potential interest rate hike from the Federal Reserve.
Ahead of a U.S. rate decision, the U.S. dollar .DXY fell against a basket of major currencies, pressured by a report in the Wall Street Journal that China was planning counter measures against U.S. trade tariffs. government bond prices were lower across the yield curve, with the two-year CA2YT=RR price down 6 Canadian cents to yield 1.859 percent and the 10-year CA10YT=RR falling 23 Canadian cents to yield 2.242 percent.
The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 1.8 basis points to a spread of -49.4 basis points. On Friday, the spread touched its widest since June 9 at -53.2 basis points.
Bank of Canada Senior Deputy Governor Carolyn Wilkins will deliver a speech on Thursday, while domestic inflation data for February is due on Friday.