By Fergal Smith
TORONTO (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday, paring some of this week's rally as rising geopolitical tensions in the Middle East weighed on risk appetite.
At 3:17 p.m. (2017 GMT), the Canadian dollar
For the week, it was up 0.7%.
"It's going to be difficult for Canada to make headway, at least in the current risk-off environment," said Michael Goshko, corporate risk manager at Western Union Business Solutions. "Tensions in the Middle East are never good for risk, or for trade."
Wall Street fell from a record high on Thursday after a U.S. air strike in Iraq, killing a top Iranian military commander, ratcheted up regional tensions.
Canada is a major exporter of commodities, including oil and runs a current account deficit, so its economy could be hurt by a slowdown in the global flow of trade or capital.
Oil prices jumped to the highest level in more than three months on fears the increased Mideast tensions could disrupt global oil supplies. U.S. crude oil futures (CLc1) settled 3.1% higher at $63.05 a barrel.
The loonie has benefited in recent weeks from an easing of the U.S.-China trade conflict and signs of recovery in the global economy.
It strengthened 5% in 2019, making it the top performing G10 currency, as the Bank of Canada kept interest rates on hold throughout the year even as some major central banks such as the Federal Reserve and the European Central Bank eased.
Canadian government bond prices were higher across a flatter yield curve on Friday, with the two-year (CA2YT=RR) up 8.5 Canadian cents to yield 1.614% and the 10-year (CA10YT=RR) rising 75 Canadian cents to yield 1.540%.
The 10-year yield touched its lowest intraday level since Dec. 4 at 1.539%.