TORONTO, April 10 (Reuters) - The Canadian dollar strengthened to a four-month high against the greenback on Thursday as investors reduced their exposure to U.S. financial markets, anticipating that the global trade war could upend a period of outperformance for the American economy.
The loonie was trading 0.6% higher at 1.4005 per U.S. dollar, or 71.40 U.S. cents, after touching its strongest intraday level since December 2 at 1.3992.
"We're seeing a bit of repatriation out of U.S. assets," said Noah Buffam, an FX strategist at CIBC Capital Markets. "The market is reassessing how exceptional the U.S. is over a longer-term period."
Wall Street's main indexes gave back some of the previous day's sharp gains, while the U.S. dollar (.DXY), tumbled against a basket of major currencies.
On Wednesday, U.S. President Donald Trump said he would temporarily lower new tariffs on many countries, even as he raised them further on goods from China.
The rally at the front-end of the U.S. yield curve has contributed to gains for the loonie, "with the market worrying about U.S. growth given these really high tariff rates on China," Buffam said.
Investors are pricing in as many as four interest rate cuts from the Federal Reserve by December, while just two cuts are expected from the Bank of Canada which has moved more aggressively than the Fed to this point in the easing campaign. ,
The price of oil , one of Canada's major exports, fell 4.3% to $59.66 a barrel on the deepening U.S.-China trade war.
Canadian bond yields eased across the curve but the decline was not as much as for U.S. yields. The 2-year was down 6.4 basis points at 2.577%.
Reporting by Fergal Smith; Editing by Kirsten Donovan
