TORONTO, Oct 6 (Reuters) - The Canadian dollar strengthened against its US counterpart on Tuesday as data showed Canada's trade surplus widening more than expected and after the greenback gave back some of its recent broad-based gains.
The loonie was trading 0.3% higher at 1.4220 per US dollar, or 70.32 US cents, after moving in a range of 1.4215 to 1.4282. On Monday, the currency touched an 18-month low at 1.4293.
Canada's trade surplus widened in August to C$4.2 billion ($2.94 billion) as exporters rushed to increase shipments to the US before President Donald Trump's new tariffs took effect. Economists had expected the surplus would expand to C$1.55 billion from an upwardly revised C$787 million.
"The loonie was largely on the defensive but it started to rally on the back of some of that trade surplus news. Plus, the US dollar was potentially a little overbought," said Rahim Madhavji, president at KnightsbridgeFX.com.
The US dollar fell against a basket of major currencies as a pullback in French government bond yields cooled fears about strain in euro zone debt markets and after oil prices fell.
US crude oil futures were trading 0.3% lower at $89.19 a barrel as supply concerns eased due to increased Middle Eastern crude exports and an agreement by the Group of Seven countries to release emergency diesel and crude stockpiles.
Canadian government bond yields edged lower across the curve, with the 10-year down 2 basis points at 3.932%.
The gap between Quebec's 10-year yield and the yield on the equivalent government of Canada bond narrowed by 5 basis points to 48 basis points after a separatist party won the province's election on Monday but fell short of a majority.
Canadian employment data for September, due on Friday, could offer clues on the state of the domestic economy. Economists expect a jobs gain of 9,200 and the unemployment rate to edge up to 6.5% from 6.4% in August.
Reporting by Fergal Smith; Editing by Chris Reese
