TORONTO, May 1 (Reuters) – The Canadian dollar weakened against its U.S. counterpart on Thursday, giving back some of the previous month’s sharp gains, as data showed the U.S. manufacturing sector deteriorating less than had been expected in a boost for the American currency.
The loonie was trading 0.4% lower at 1.3850 per U.S. dollar, or 72.20 U.S. cents, after trading in a range of 1.3785 to 1.3862. In April, the currency climbed 4.3%, its biggest monthly advance in a decade.
“The price action has all revolved around a stronger-than-expected U.S. ISM – stronger U.S. yields, stronger U.S. dollar across the board,” said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
The Institute for Supply Management (ISM) said that its manufacturing PMI dropped to a five-month low of 48.7 last month. Economists polled by Reuters had forecast the PMI declining to 48.0.
Optimism about trade deals between the United States and its partners added to support for the U.S. currency.
“Zooming out, the Canadian dollar is in an uptrend,” Bregar said. “You’d need to see a sharp deterioration in risk sentiment or something on the trade front to unwind that.”
USD-CAD was trading below its 200-day moving average, a popular measure of long-term trends, which sits at about 1.40.
Canadian manufacturing activity contracted in April at the steepest rate since shortly after the start of the COVID-19 pandemic as the uncertain nature of U.S. trade policy weighed on production and new orders.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) fell to 45.3 last month from 46.3 in March, its lowest level since May 2020.
Canadian bond yields were mixed across the curve. The 10-year was up less than one basis point at 3.105%, after touching on Wednesday a three-week low intraday at 3.06%.
Reporting by Fergal Smith; editing by Diane Craft
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