TORONTO, Jan 21 (Reuters) - The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Wednesday before paring its gains, as investors monitored developments at the World Economic Forum in Davos and awaited talks to renew a continental trade pact.
The loonie was trading 0.1% higher at 1.3825 per U.S. dollar, or 72.33 U.S. cents, after touching its strongest intraday level since January 6 at 1.3786.
"It feels like a mini reset for the loonie that had been under pressure since late December," said Amo Sahota, director at Klarity FX in San Francisco.
"We don't envisage the loonie going on a powerful rally to retest the December USD-CAD lows near 1.3650. The USMCA renegotiations set for mid-year are a notable headwind and domestic terms of trade are soft with sluggish oil prices."
The United States-Mexico-Canada Agreement, which has shielded much of Canada's exports from U.S. tariffs, is set for review by a July 1 deadline.
The U.S. dollar (.DXY), opens new tab recouped some of the previous day's sharp decline against a basket of major currencies as U.S. President Donald Trump ruled out military action in Greenland but said he was seeking immediate negotiations to discuss a deal to acquire the northern island from Denmark.
Trump chided Mark Carney in a Davos speech after the Canadian prime minister delivered a rousing address on a "rupture" in the international rules-based order.
The price of oil, one of Canada's major exports, rose 0.6% to $60.73 a barrel as investors assessed a temporary shutdown at two large fields in Kazakhstan. Still, oil was trading toward the bottom of its range in recent years.
Producer prices in Canada fell 0.6% in December from November as energy prices declined. The annual growth rate slowed to 4.9% from 5.9%.
Investors expect the Bank of Canada to leave its benchmark interest rate on hold next week at a three-year low of 2.25%.
Canadian bond yields were mixed across the curve, with the 10-year down half a basis point at 3.430%.
Reporting by Fergal Smith; Editing by Paul Simao
