Toronto (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as commodity prices rose and investors weighed the resignation of the British Prime Minister.

The rise in oil prices, one of Canada's main exports, is seen as a response to supply shortages and news that China is considering reducing the quarantine period for incoming visitors.

U.S. crude prices rose 2.3% to $87.50 a barrel, while the U.S. dollar as a safe haven gave up some recent gains against a basket of major currencies, including the British pound, as Liz Truss said she is resigning as British Prime Minister. Truss was ousted due to an economic program that sent shockwaves through financial markets last month.

The Canadian dollar rose 0.4% to 1.3713 per dollar, or 72.92 U.S. cents, after trading in a range of 1.3698 to 1.3806. The currency was supported despite other evidence that the slowdown in the Canadian housing market is leading to lower prices.

Canadian home prices fell 3.1% in September from August, the largest monthly drop since the index was launched in 1999, while year-over-year price gains continued to slow, according to the composite home price data from the National Bank based on Teranet.

Analysts said that even with rising recession worries in Canada, the central bank is likely to proceed with another interest rate hike next week after data showed core inflation remained despite the tight monetary policy.

Canadian government bond yields were higher across the curve, tracking moves in U.S. Treasury bonds.

The 10-year yield touched its highest level since June 16 at 3.584% before falling to 3.569%, up 1.8 basis points on the day.

Editing: Yusra Bamtraf