Canadian dollar steadies as Saudi Arabia reassures Canadian oil customers

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Thursday as oil prices rose after a deep slide the day before and Saudi Arabia said its oil customers in Canada will not be affected by a diplomatic dispute.

A row over human rights in Saudi Arabia will not have any impact on Saudi oil supplies to Canada, its energy minister said, reassuring customers after Riyadh froze new trade with Canada and ruled out mediation efforts.

The loonie was buffeted on Wednesday by the diplomatic dispute, hitting a two-week low at C$1.3121. But it recovered as investors decided that potential Canadian asset sales by Saudi Arabia will have a short-lived impact on the currency.

"It appears that Saudi threats to dump Canadian assets are being taken in stride," Robert Kavcic, a senior economist at BMO Capital Markets, said in a research note.

The price of oil, one of Canada's major exports, rose on Thursday after the first round of U.S. sanctions against Iran came into effect, although confidence in crude demand has been hit by an escalating China-U.S. trade dispute.

U.S. crude prices were up 0.7 percent at $67.38 a barrel.

At 9:27 a.m. EDT (1327 GMT), the Canadian dollar was nearly unchanged at C$1.3022 to the greenback, or 76.79 U.S. cents. The currency traded in a range of C$1.3001 to C$1.3048.

Canada's dollar will rise over the coming year as the Bank of Canada hikes interest rates and higher oil prices become more supportive of the currency, a Reuters poll showed, but it will take a deal on the North American Free Trade Agreement to trigger bigger gains.

Canadian new housing prices rose by 0.1 percent in June, the first gain in seven months, largely due to higher construction costs across the country, Statistics Canada said.

Separate data showed that Canadian seasonally adjusted housing starts fell to 206,314 in July from a revised 246,200 units in June.

Canada's jobs data for July is due on Friday.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries as U.S. data showed producer prices were unchanged in July.

The 10-year rose 22 Canadian cents to yield 2.335 percent.

(Reporting by Fergal Smith; Editing by Meredith Mazzilli)