The currency was ahead 0.29 of a cent to 100.82 cents US. It had been negative earlier with traders inclined to avoid riskier assets in the wake of comments from Senate Majority Leader Harry Reid late Tuesday that there had been "little progress" in talks aimed at avoiding the so-called fiscal cliff in the U.S. at the end of next month.
Economists say the combination of steep tax increases and spending cuts would significantly cut economic growth and likely push the U.S. back into recession and damage other economies around the world as well.
But the tone turned more positive Wednesday morning after House Speaker John Boehner said he was optimistic that a budget deal can be reached with President Barack Obama and the Democrats.
Adding to optimism was a remark from President Barack Obama that he believes that members of both parties can reach a "framework" on a debt-cutting deal before Christmas.
And an administration official says two of President Barack Obama’s top negotiators on the "fiscal cliff" will meet separately on Thursday with top political leaders.
Early loonie weakness also reflected nervousness about another set of negotiations early in the new year that will aim to again raise the U.S. government's debt ceiling.
There are also growing worries that Argentina may default on its debt.
Commodity prices were also off the worst levels of the session as January crude on the New York Mercantile Exchange dropped 69 cents to US$86.49 a barrel.
December copper fell one cent to US$3.52 while December gold declined $25.80 to US$1,716.50 an ounce.