Canadian dollar pares gains ahead of US tariff decision
TORONTO, March 3 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday but gave back much of its earlier gains as domestic data showed manufacturing activity contracting for the first time in six months and investors awaited details on expected U.S. trade tariffs.
The loonie was trading 0.2% higher at 1.4430 per U.S. dollar, or 69.30 U.S. cents, after moving in a range of 1.4370 to 1.4466. On Friday, the currency touched its weakest intraday level since February 4 at 1.4471.
U.S. President Donald Trump will decide on Monday what levels of tariffs he will impose early on Tuesday on Canada and Mexico amid last-minute negotiations over border security and efforts to halt the inflow of fentanyl opioids, his commerce secretary said.
The tariffs are scheduled to take effect at 12:01 a.m. EST (0501 GMT) on Tuesday. Canada sends about 75% of its exports to the United States.
"With still a little bit of uncertainty in the air, traders are staying on the sidelines, keeping that U.S. dollar elevated until more details are provided of the exact specifics of the tariffs," said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc.
The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) fell to 47.8 from 51.6 in January, its first move below the 50.0 no-change mark since August, as an uncertain trade outlook led to firms turning the most pessimistic since the start of the COVID-19 pandemic.
The price of oil, one of Canada's major exports, settled nearly 2% lower at $68.37 a barrel on reports OPEC+ will proceed with a planned oil output increase in April and on worries that a trade war could hurt the global economy.
Canadian bond yields were mixed across the curve. The 10-year was down less than half a basis point at 2.896% after earlier touching its lowest since September 18 at 2.878%.
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