The Canadian dollar strengthened against its U.S. counterpart on Thursday, adding to its more stable profile this week as investors looked toward Friday's employment data on both sides of the border.

Confirmation that President Donald Trump is tapping Fed Governor Jerome Powell to succeed Janet Yellen as the new head of the U.S. Federal Reserve also provided some support for the Canadian dollar, which reached its strongest level in a week.

The loonie has fallen more than six per cent since posting a more than two-year high in September at $1.2063. Analysts said it has found support around $1.2900, near the 50 per cent retracement of the currency's rapid appreciation from May to September.

"The move up was over-extended," said David Bradley, director of foreign exchange trading at Scotiabank, who does not expect the loonie to weaken much further going into Friday's job numbers for October.

"I think you'd need a really strong U.S. print or a really weak Canadian print to see USD/CAD trade back up to recent highs. It seems like there's solid offers every time we trade up toward $1.29," he said.

On Friday, the loonie hit its weakest in more than three months at $1.2916, pressured by data which pointed to slower growth in Canada's economy in the third quarter after a rapid expansion in the first half.

September trade data for Canada is also due on Friday.

At 4:00 p.m. ET, the Canadian dollar was trading at $1.2808 to the greenback, or 78.08 cents US, up 0.4 per cent. The currency traded between $1.2800 and $1.2876 during the session.

Prices of oil inched toward two-year highs as supply cuts by the Organization of the Petroleum Exporting Countries and other major exporters tightened the market and drained inventories.

Bank of Canada Governor Stephen Poloz said on Wednesday that while monetary policy decisions will have an effect on the Canadian dollar, oil prices will have the biggest long-term impact on the currency.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year firmed one cent to yield 1.411 per cent and the 10-year gained 14 cents to yield 1.958 per cent.