TORONTO, Dec 13 (Reuters) - The Canadian dollar hit a 4-1/2-year low against its U.S. counterpart on Friday as investors worried about a potential trade war between the United States and Canada and dialed back bets on Federal Reserve interest rate cuts in 2025.
The loonie was trading 0.1% lower at 1.4230 per U.S. dollar, or 70.27 U.S. cents, after touching its weakest intraday level since April 2020 at 1.4244.
For the week, the currency was down 0.5%, its third straight weekly decline.
Recent reports that Canada was considering tit-for-tat retaliatory tariffs if U.S. President-elect Donald Trump carries out his threat to tax Canadian imports have given traders another reason to bet against the loonie, said Amo Sahota, director at Klarity FX in San Francisco.
"It could be a long wait until the U.S. presidential inauguration to see how determined Trump is to begin his second term with a full trade war," Sahota said.
Some Canadian provincial premiers are urging Ottawa to respond robustly to the threat of U.S. tariffs, Canada's finance minister said on Wednesday.
The U.S. dollar (.DXY), opens new tab is headed for its best weekly performance in a month as investors priced in the possibility of the Fed cutting interest rates more slowly next year.
The price of oil , one of Canada's major exports, was up 1.6% at $71.13 a barrel on expectations additional sanctions on Russia and Iran could tighten supplies.
Domestic data for October showed that factory sales grew 2.1% from September and that wholesale trade was up 1.0%, possible signs that lower borrowing costs are helping to boost the economy. On Wednesday, the Bank of Canada slashed its benchmark interest rate by half a percentage point to 3.25%.
The Canadian 10-year yield rose 3.2 basis points to 3.187%, extending its rebound from a low of 2.977% on Wednesday.
Reporting by Fergal Smith; Editing by Paul Simao
