TORONTO, July 2 (Reuters) - The Canadian dollar strengthened to a 10-day high against its U.S. counterpart on Thursday as U.S. employment data weighed on the greenback and after domestic data showed further growth in the manufacturing sector.
The loonie was trading 0.3% higher at 1.4175 per U.S. dollar, or 70.55 U.S. cents, after touching its strongest intraday level since June 22 at 1.4147.
U.S. job growth slowed sharply in June and payroll gains for the prior two months were revised lower, pointing to a cooling labor market and prompting financial markets to dial back expectations for a near-term interest rate hike from the Federal Reserve.
"Coming after two months that saw solid nonfarm payroll beats recorded, this latest data has helped to dent a growing Fed rate hike narrative, and in turn, the dollar," Nick Rees, head of macro research at Monex Europe, said in a note.
The U.S. dollar fell against a basket of major currencies, while the price of oil, one of Canada's major exports, settled 0.2% higher at $68.69 a barrel.
Canada's manufacturing sector expanded at a slightly faster pace in June as production and employment rose. The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) edged up to 53.0 last month from 52.9 in May.
The loonie fell 2.8% in June, marking its steepest monthly decline since October 2024.
President Donald Trump's administration on Wednesday declined to extend the U.S.-Mexico-Canada Agreement, starting a decade-long clock to wind down the trade deal as it seeks changes to try to reshore manufacturing jobs and reduce U.S. trade deficits with its North American neighbors.
Canadian bond yields rose on Thursday, playing catch-up with U.S. Treasuries after the Canadian bond market was closed the previous day for the Canada Day holiday.
The 10-year was up 8.4 basis points at 3.466%, after earlier touching its highest level since June 11 at 3.480%.
Reporting by Fergal Smith; Editing by Will Dunham
