TORONTO, Oct 8 (Reuters) - The Canadian dollar edged higher against its US counterpart on Thursday as the gap between US and Canadian yields narrowed from the historically wide levels seen earlier in the week and as investors awaited Canada's monthly employment report.
The loonie was trading 0.1% higher at 1.4245 per US dollar, or 70.20 US cents, after touching on an 18-month low of 1.4293 on Monday.
"It's trying to bounce," said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull. "I think the driver today has been the compression in the 2-year yield spread."
Canada's 2-year yield was trading about 152 basis points below the US equivalent. On Monday, the gap was 158 basis points, its widest since February 2025.
A higher yield tends to increase the attractiveness of a currency.
The price of oil, one of Canada's major exports, jumped on persistent worries about supply from the Middle East amid an increase in attacks on shipping in the Gulf and the Strait of Hormuz. US crude oil futures were trading 3.1% higher at $91.02 a barrel.
Canadian employment data for September, due on Friday, could offer clues on the state of Canada's economy after a recent intensification of trade uncertainty. Economists expect a gain of 9,200 jobs and the unemployment rate to edge up to 6.5% from 6.4% in August.
US Trade Representative Jamieson Greer said the US is sticking to its stance in trade talks with Canada, adding that a recent election in the Canadian province of Quebec is preoccupying Ottawa.
Canadian government bond yields were mixed across a flatter curve. The 10-year was down 1.2 basis points at 3.936%, remaining below the 3-year high it touched last week at 4.042%.
Reporting by Fergal Smith; Editing by Paul Simao
