TORONTO, Feb 1 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday, benefiting from a rebound in stocks one day after the Federal Reserve dashed hopes of an interest rate cut as soon as March.
The loonie was trading 0.4% higher at 1.3375 to the greenback, or 74.77 U.S. cents, after moving in a range of 1.3368 to 1.3464.
The currency is particularly response to movement in U.S. equities, said Tony Valente, a senior FX dealer at AscendantFX.
"U.S. stock are up across the board and so is the CAD," Valente said.
Wall Street rose following a selloff on Wednesday, with the focus moving to Big Tech earnings due later in the day. Canada sends about 75% of its exports to the United States.
The loonie's gains took it back in reach of the near three-week high it touched intraday on Wednesday after the release of stronger-than-expected Canadian GDP data.
Domestic data on Thursday showed signs of a bottom in the manufacturing sector. The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) rose to a seasonally adjusted 48.3 in January after slumping to 45.4 in December, its lowest level since May 2020.
Bank of Canada Governor Tiff Macklem said that new developments could push inflation higher, and that would mean the central bank may still need to raise interest rates.
Canadian government bond yields eased across the curve, tracking moves in U.S. Treasuries.
The 10-year was down 3.3 basis points at 3.286%, while the gap between it and the U.S. equivalent narrowed by 5 basis points to 59.6 basis points, its narrowest since Oct. 5.
Reporting by Fergal Smith; Editing by Leslie Adler
