By Fergal Smith
TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Friday as the loonie held on to this week's gains even after data showed the U.S. economy expanded at its fastest clip in nearly four years.
At 4 p.m. EDT (2000 GMT), the Canadian dollar
The currency, which on Wednesday touched its highest level in nearly six weeks at C$1.3025, traded in a narrow range of C$1.3041 to C$1.3080.
For the week, the loonie is on track to rise 0.7 percent. It has been boosted by stronger-than-expected domestic data and easing of trans-Atlantic trade tensions.
Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.
"The big takeaway this week has been the Canadian dollar outperforming," said Amo Sahota, director at Klarity FX in San Francisco.
Penetration by USD-CAD this week of a rising trend line since April has set the market up for additional Canadian dollar appreciation over the coming weeks, Sahota said.
Canada is in talks with Mexico and the United States to revamp the North American Free Trade Agreement (NAFTA). Mexico and the United States agreed on Thursday to step up talks on updating NAFTA in hopes of reaching an agreement on major issues by August.
Additional "positive noises" on NAFTA could boost expectations for another Bank of Canada interest rate increase as soon as October, said Sahota.
The central bank has raised its benchmark interest rate twice this year to sit at 1.50 percent. Money markets see a greater-than 60 percent chance of an October hike.
Speculators have cut bearish bets on the Canadian dollar for the second straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of July 24, net short positions had fallen to 44,511 contracts from 47,484 a week earlier.
The U.S. dollar (DXY) slipped against a basket of currencies as the robust U.S. data failed to erase worries that trade frictions would be a drag in the second half of 2018.
U.S. crude oil futures (CLc1) settled 1.3 percent lower at $68.69 a barrel. Oil is one of Canada's major exports.
Canadian government bond prices were lower across the yield curve, with the 10-year (CA10YT=RR) falling 3 Canadian cents to yield 2.296 percent.