CANADA FX DEBT-Canadian dollar weakens as trade deal uncertainty clouds economic outlook

By Fergal Smith

TORONTO, Sept 9 (Reuters) - The Canadian dollar fell against its U.S. counterpart on Tuesday, approaching the weakest level since August, as an uncertain outlook for the Canadian economy supported recent moves by investors to increase bearish bets on the currency.

The loonie CAD= was trading 0.3% lower at 1.3845 per U.S. dollar, or 72.23 U.S. cents, after moving in a range of 1.3794 to 1.3848. On Friday, the currency touched a 9-day low at 1.3854.

"This weakness is partially attributable to an increase in net-short institutional positioning," said Kevin Ford, FX & macro strategist at Convera.

"While Canada benefits from the CUSMA deal and has one of the lowest effective tariff rates globally, tariffs on other sectors and ongoing uncertainty about a new trade deal with the U.S. continue to dampen the medium-term economic outlook."

Canadian employment data on Friday added to evidence that uncertainty related to U.S. tariffs is taking a toll on Canada's economy.

The vast amount of Canada's exports enter the U.S. tariff-free under the Canada-United States-Mexico Agreement but the continental trade pact is up for review in July next year.

The U.S. dollar .DXY fell against a basket of major currencies as the preliminary annual benchmark revision estimate to the closely watched U.S. payrolls data suggested a far weaker labor market than was previously thought.

The price of oil CLc1, one of Canada's major exports, settled 0.6% higher at $62.60 a barrel after the Israeli military said it carried out an attack on Hamas leadership in Qatari capital Doha.

Canadian bond yields edged higher across the curve. The 10-year CA10YT=RR was up 1.6 basis points at 3.225%, after touching on Monday a three-month low at 3.208%.