TORONTO - The Canadian dollar was slightly higher Thursday with traders still firmly focused on the continued failure by American lawmakers to come to an agreement to raise the debt ceiling.
The loonie rose 0.04 of a cent to 105.43 cents US, off early highs of 105.69 cents as the American dollar strengthened in the late morning.
The greenback has been under pressure amid fears that a deal won't be clinched in time to prevent the world's largest economy from a potential debt default.
Investors are increasingly anxious that a deal to raise the country's US$14.3 trillion borrowing limit won't be in place by the Aug. 2 deadline.
"There are no visible signs of progress toward a compromise solution and media reports suggest behind-the-scenes negotiations are going poorly," observed Adam Cole, Global Head FX Strategy at RBC Capital Markets.
The House of Representatives plan a vote Thursday on a Republican plan to cut spending and raise the borrowing limit.
But Cole also noted that "the package has virtually no chance of clearing the Senate as Democrats have already declared their intention to vote against it in sufficient numbers to guarantee its failure."
"With time now running very short, it seems increasingly likely that the administration's ability to continue functioning beyond hitting the debt ceiling on Aug. 2 will be put to the test."
Also weighing on investor minds is the possibility of a debt downgrade, which would raise interest rates as the difficulty of reaching an agreement on raising the debt limit may leave a lasting impact on investor sentiment.
Oil prices were little changed after sliding more than $2 Wednesday on worries about how economic disruptions would affect demand. Prices were also depressed by data showing a surprising increase in U.S. oil inventories last week.
On Thursday, the September crude contract was ahead 30 cents to US$97.70 a barrel.
Metal prices were steady with the September copper contract up three cents at US$4.48.
Bullion moved further away from Tuesday's latest record high, down $8.10 to US$1,607 an ounce.
