TORONTO, Oct 1 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday, moving closer to a recent four-month low, as domestic data showed a deeper downturn in the manufacturing sector.
The loonie was trading 0.2% lower at 1.3945 per U.S. dollar, or 71.71 U.S. cents, after moving in a range of 1.3907 to 1.3957. On Friday, the currency touched a four-month low at 1.3958, its weakest level since May 20.
Canada's manufacturing sector contracted at a steeper pace in September as an uncertain trading environment weighed on production and new orders. The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) fell to 47.7 in September from 48.3 in August.
"Softer PMI data in Canada added to some expectations of another cut by the BoC," said Jayati Bharadwaj, a global FX strategist at TD Securities.
The Bank of Canada expects to release baseline projections for the economy and inflation with its monetary policy report on October 29, its summary of deliberations showed.
Investors see a 55% chance the BoC will lower interest rates at that meeting. Last month, the central bank cut its benchmark rate by 25 basis points to 2.50%, its first cut since March.
The U.S. dollar (.DXY), opens new tab clawed back its earlier decline against a basket of major currencies as the U.S. Supreme Court left Federal Reserve Governor Lisa Cook in place for now, despite a Justice Department request to remove her immediately.
The news eased concerns around the Fed's credibility, Bharadwaj said.
A 16-week low for oil, one of Canada's major exports, added to headwinds for the loonie as a U.S. government shutdown fed worries about the global economy. U.S. crude oil futures were trading 1% lower at $61.67 a barrel.
Canadian bond yields were mixed across the curve as trading resumed after a market holiday on Tuesday. The 10-year was little changed at 3.187%.
Reporting by Fergal Smith; Editing by Sergio Non
