TORONTO, May 1 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday but held much of its weekly gain, as domestic data showed Canada's manufacturing sector expanded in April at the fastest pace in nearly four years.
The loonie was trading 0.1% lower at 1.3585 per U.S. dollar, or 73.61 U.S. cents, after moving in a range of 1.3551 to 1.3593. For the week, the loonie was up 0.6%, notching its fourth straight weekly gain.
"In the shorter run, elevated energy prices may keep market focus on the risk of tighter BoC monetary policy," Shaun Osborne and Eric Theoret, strategists at Scotiabank, said in a note. "At the same time, the Canadian economy has rebounded well after the late 2025 dip in growth."
The S&P Global Canada Manufacturing Purchasing Managers' Index rose to 53.3 last month from 50.0 in March, marking the highest level since June 2022, as the war in the Middle East spurred stock building and added to inflation pressures.
It follows preliminary data on Thursday that pointed to annualized growth of 1.7% in the first quarter, which would slightly eclipse the Bank of Canada's 1.5% forecast.
On Wednesday, the BoC said that if oil prices stayed high and began pushing up inflation, it might have to respond with consecutive interest rate hikes. Investors have priced in two rate increases this year, swap market data showed.
Oil, one of Canada's major exports, gave back some of its recent gains after Iran submitted its latest proposal for negotiations with the United States. U.S. crude oil futures settled nearly 3% lower at $101.94 a barrel.
Canadian bond yields moved lower across the curve. The 10-year was down 1.3 basis points at 3.530%, extending its pullback from a one-month high on Wednesday at 3.623%.
Reporting by Fergal Smith Editing by Rod Nickel
