TORONTO: The Canadian dollar weakened against its US counterpart on Wednesday, pulling back from an earlier five-week high, as Sino-US trade tensions rose and oil prices fell.
China hit back quickly against the Trump administration's plans to slap tariffs on $50 billion in Chinese goods, retaliating with a list of similar duties on US exports to China, including soybeans, planes, cars, beef and chemicals.
Canada's commodity-linked economy could be hurt if global trade slows.
The price of oil, one of Canada's major exports, fell to its lowest in two weeks on increased prospects of a trade war. US crude oil futures were down 1.6 percent at $62.50 a barrel.
At 9:10 a.m. EDT (1310 GMT), the Canadian dollar was trading 0.3 percent lower at 1.2843 to the greenback, or 77.86 US cents.
The currency's weakest level of the session was C$1.2845, while it touched its strongest since Feb. 28 at C$1.2775.
The loonie got a boost on Tuesday from growing investor optimism on a deal to revamp the North American Free Trade Agreement.
The United States, Canada and Mexico could soon announce a deal in principle to update NAFTA that would likely tackle the key issue of autos content while leaving other contentious chapters to be dealt with later, three sources familiar with the matter said on Tuesday.
Canadian government bond prices were higher across the yield curve in sympathy with US Treasuries, as renewed pressure on US stocks offset data showing US private-sector employment rose by a robust 241,000 jobs in March.
The two-year rose 2 Canadian cents to yield 1.787 percent and the 10-year climbed 23 Canadian cents to yield 2.119 percent.
Toronto homes sales tumbled 39.5 percent in March from the previous year, as tighter mortgage rules and higher borrowing costs dampened demand, data showed on Wed Canadian trade data for February is due on Thursday and the March employment report is due on Friday.
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