TORONTO, April 29 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday, but the move was modest as investors reacted calmly to a less conclusive outcome to the Canadian general election than had been expected and also shrugged off a drop in oil prices.
The loonie was trading 0.2% lower at 1.3850 per U.S. dollar, or 72.20 U.S. cents, after trading in a range of 1.3809 to 1.3871.
The Liberal Party retained power in parliamentary elections but was likely to fall short of the outright majority that polls had indicated and that Prime Minister Mark Carney had sought to help negotiate with the United States on trade tariffs.
The market's reaction signals that "calmer heads are prevailing and maybe a quiet confidence that tariffs will get negotiated away and this is just a long walk to the renegotiation of the USMCA deal," said Amo Sahota, director at Klarity FX in San Francisco.
The United States-Mexico-Canada Agreement - a free trade pact between the three nations - is up for review in 2026.
U.S. President Donald Trump will soften the blow of his auto tariffs on Tuesday through an executive order that mixes credits with relief from other levies on parts and materials, after automakers pressed their case with the administration.
Autos are among Canada's largest exports, as is oil.
U.S. crude oil futures settled 2.6% lower at $60.42 a barrel as investors braced for OPEC+ to boost output and worried about the impact of tariffs on the global economy.
Canadian government bond yields eased across the curve, tracking moves in U.S. Treasuries, as U.S. consumer confidence hit an almost five-year low. The 10-year was down 3.7 basis points at 3.129%.
Reporting by Fergal Smith in Toronto; Editing by Nia Williams
