The Canadian dollar rose sharply against its US counterpart on Thursday, recovering from a six-week low as optimism grew over the possibility of reaching an agreement to extend the ceasefire in the Middle East, boosting investor risk appetite.

The Canadian dollar, known as the loonie, climbed 0.4% to C$1.3780 against the US dollar, equivalent to 72.57 US cents, heading for its biggest daily gain since April 30.

Earlier in the session, the Canadian currency had touched its weakest level since April 13 at C$1.3869 per US dollar.

The moves came after reports said the United States and Iran had reached an agreement to extend the ceasefire, pending approval from US President Donald Trump, following Irans targeting of a US base in Kuwait in response to American strikes against what Washington described as Iranian drone operations.

Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull, said markets had returned to believing a deal was possible, adding: Theres risk appetite everywhere, including in the Canadian dollar.

US stocks rose, while the US dollar weakened against a basket of major currencies.

US West Texas Intermediate crude prices also rose 0.4% to $89.06 per barrel, supporting the Canadian dollar since oil is one of Canadas key exports.

In economic data, figures showed Canadas current account deficit widened to C$7.18 billion in the first quarter, compared with a revised deficit of C$1 billion in the fourth quarter of last year.

Economists expect first-quarter GDP data, due Friday, to show the Canadian economy expanded at an annualized rate of 1.5%.

In a separate development, formal negotiations began between the United States and Mexico to rewrite the United States-Mexico-Canada trade agreement, amid US demands to tighten regional rules of origin, while Canada was excluded from the current round of talks.

Canadian Prime Minister Mark Carney called for a new partnership with the United States to help make America great again during a speech in New York.

In bond markets, Canadian government bond yields declined across maturities, with the 10-year yield falling 2.1 basis points to 3.444% after earlier touching its highest level in around a week at 3.499%.