TORONTO, May 29 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as some investors doubted a U.S. court ruling would change the outlook for U.S. tariffs and after domestic data showed that the current account deficit narrowed in the first quarter.
The loonie was trading 0.2% higher at 1.3805 per U.S. dollar, or 72.44 U.S. cents, after moving in a range of 1.3786 to 1.3861.
The U.S. dollar fell against a basket of major currencies, reversing earlier gains, as investors prepared for a battle over U.S. President Donald Trump’s tariff agenda after a U.S. trade court on Wednesday blocked most of the proposed trade levies.
"Last night’s court ruling does little to change the medium run outlook for tariffs in our view, leaving us unsurprised to see an initial USD bounce unwind through early trading," said Nick Rees, senior FX market analyst at Monex Europe Ltd.
Downbeat U.S. economic data, including an increase in the number of Americans filing new applications for jobless benefits, weighed on the greenback, Rees said.
Canada sends about 75% of its exports to the United States, so its economy could be hurt particularly badly by the global trade war.
Prime Minister Mark Carney welcomed the ruling.The Canadian current account deficit narrowed to C$2.13 billion ($1.54 billion) in the first quarter from an upwardly revised C$3.56 billion deficit in the fourth quarter.
First-quarter gross domestic product data is due on Friday, which could guide expectations for next week's Bank of Canada interest rate decision. Economists expect growth to slow to an annualized rate of 1.7% from 2.6% in the previous quarter.
The price of oil , one of Canada's major exports, fell 1.4% to $61.00 a barrel after the International Energy Agency's director warned of weaker demand in China.
Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year was down 3.3 basis points at 3.213%.
Reporting by Fergal Smith; Editing by Kirsten Donovan
