CANADA FX DEBT-Canadian dollar clings to monthly gain as GDP beats estimates

By Fergal Smith

TORONTO, Feb 28 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Friday as investors assessed domestic data that showed stronger-than-expected economic growth and awaited the potential implementation of U.S. trade tariffs.

The loonie CAD= was trading nearly unchanged at 1.4440 per U.S. dollar, or 69.25 U.S. cents, after touching its weakest intraday level since February 4 at to 1.4453.

For the week, the currency was on track to decline 1.5%. Still, it was up 0.6% since the start of February after recovering from a 22-year low earlier in the month.

Canada's gross domestic product expanded by 2.6% on an annualized basis in the fourth quarter, surpassing expectations for an increase of 1.8%, helped by a jump in consumer spending.

"The Canadian economy has certainly faced some headwinds but it exited 2024 in a stronger position than believed," said Adam Button, chief currency analyst at ForexLive.

"Canadian consumers continue to reach into their wallets and spend though I expect tariff threats to reverse some of that in Q1."

Canada and Mexico sought to show U.S. President Donald Trump's administration evidence of progress in curbing the flow of fentanyl opioids into the U.S. ahead of a March 4 deadline for punishing 25% tariffs on their goods imports.

"Markets remain somewhat skeptical that, if it comes to it, 25% tariffs will be in place for long," Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

"The economic consequences for Canada from high tariffs are significant but they are non-negligible for the U.S."

Canadian bond yields fell across the curve, tracking moves in U.S. Treasuries after U.S. data showed annual inflation subsided last month.

The 10-year CA10YT=RR was down 4.3 basis points at 2.924%, after earlier touching its lowest level since February 3 at 2.904%.