CANADA FX DEBT-Canadian dollar hits one-month low as trade war begins

By Fergal Smith

TORONTO, March 4 (Reuters) - The Canadian dollar weakened to a one-month low against its U.S. counterpart on Tuesday as investors raised bets on further interest rate cuts from the Bank of Canada after the start of a trade war likely to badly hurt Canada's economy.

The loonie CAD= was trading 0.2% lower at 1.4510 per U.S. dollar, or 68.92 U.S. cents, after touching its weakest intraday level since February 3 at 1.4543.

Canadian Prime Minister Justin Trudeau told U.S. President Donald Trump that his new 25% tariffs on Canadian goods were "a very dumb thing to do" and said Ottawa was striking back immediately.

Trump threatened to hike tariffs on Canadian goods even higher, in an apparent reference to a U.S. plan to impose "reciprocal tariffs" on global trading partners on April 2.

"This is only the first shot of the tariffs. There is more pressure coming to bear," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. "This is going to force the Bank of Canada to cut rates next week."

Investors see a roughly 90% chance that the BoC will reduce its benchmark rate by a further 25 basis points on March 12, after lowering the rate to 3% in January to support the economy. 0#BOCWATCH

Oil, one of Canada's major exports, was trading 0.2% lower at $68.25 a barrel following reports that OPEC+ will proceed with a planned output increase in April.

Canadian bond yields were mixed across a steeper curve. The 2-year CA2YT=RR was down 4.1 basis points at 2.436%, its lowest since April 2022.