CANADA FX DEBT-Canadian dollar weakens ahead of expected interest rate cut

By Fergal Smith

TORONTO, March 10 - The Canadian dollar weakened against its U.S. counterpart on Monday as investors bet that the Bank of Canada would continue its easing campaign this week to support an economy threatened by U.S. trade tariffs.

The loonie CAD= was trading 0.3% lower at 1.4425 to the U.S. dollar, or 69.32 U.S. cents, after touching its weakest intraday level since last Wednesday at 1.4440.

Members of the ruling Liberal party in Canada have bet on former central banker Mark Carney as the man best placed to take on U.S. President Donald Trump, who has threatened annexation as well as launching a trade war and punishing tariffs on Canada.

Economic confidence will suffer even if tariffs continue to be delayed, keeping the Canadian dollar "on the weak side," said Aaron Hurd, senior portfolio manager in the currency group at State Street Global Advisors.

"If you're an exporter or a U.S. company with production in Canada, you're not going to do any capex (capital expenditure) until you've a lot more certainty."

Investors see an 87% chance that the BoC will cut its benchmark interest rate by 25 basis points on Wednesday, after the central bank lowered the rate by two percentage points since June to a level of 3%. 0#BOCWATCH

"That expected rate cut is going to help keep a lid on CAD as well," Hurd said.

The price of oil, one of Canada's major exports, was trading 1.1% lower at $66.28 a barrel on tariff uncertainty and rising output from OPEC+ producers.

Canadian government bond yields moved lower across the curve, tracking moves in U.S. Treasuries, as investors grew more concerned about the prospects of a U.S. recession. The 10-year CA10YT=RR was down 5 basis points at 2.983%.