TOKYO (Reuters) – Commodity-linked currencies such as the Australian dollar and the Canadian dollar rose on Wednesday, helped by a rise in oil prices and growing optimism that China and the United States may be inching toward a trade deal.

News that the two sides had agreed to extend trade talks in Beijing for an unscheduled third day on Wednesday boosted oil prices, with U.S. West Texas Intermediate (WTI) crude oil futures topping $50 a barrel for the first time this year. [O/R]

That, in turn, helped spur demand for riskier assets and commodity-linked currencies.

“Markets are finding comfort in the fact that the trading level of WTI futures has shifted above $50 a barrel,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“Commodity-linked currencies are performing strongly as a result,” he said, noting that the WTI futures had tried, but were not able to cross the psychologically-important level during the previous trading session.

The Aussie, often considered a gauge of global risk appetite as well as a liquid proxy of Chinese growth because of Australia’s export-reliant economy, was up 0.3 percent at 71.62 cents.

The Canadian dollar and the Norwegian crown were also up more than a quarter of a percent each, while the New Zealand dollar gained nearly half a percent.

The rally in riskier assets has accelerated since last Friday when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year.

“The market became too pessimistic about the global economy up to the beginning of the year, but it seems this kind of pessimism is fading,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

The dollar index, which measures the greenback against a basket of six peers, edged 0.1 percent lower to 95.803. It hovered not far off an 11-week low of 95.638 touched early this week.

Against the yen, the dollar gained one-tenths of a percent to 108.84 yen per dollar.

Elsewhere, the euro edged up 0.2 percent to $1.1459, but its rebound was not big enough to recover a slightly steeper loss in the previous session on concerns about a slowdown in the euro zone economy.

An unexpected fall in German industrial output for the third straight month weighed on the euro during the previous session. The drop was modest, but it underscored concerns about a slowdown and the European Central Bank’s caution as it tries to wean the region off stimulus.

The British pound tacked on 0.2 percent to $1.2740. Traders expect sterling to remain volatile over the next few weeks due to Brexit woes.

“I think there will be another drama. Uncertainty dominates again over sterling. It will face downward pressure and the euro will suffer as well,” said Mizuho’s Yamamoto.

The British parliament is due to vote on Prime Minister Theresa May’s Brexit agreement on Jan. 15, and the run-up is likely to dominate trading in sterling. May is set to lose the vote unless she can convince opponents within and outside her party to back her deal.

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