Canadian dollar gains, moving closer to pre-tariff threat level
Canadian dollar rises 0.2% against the greenback
Moves closer to level prior to tariff pledge
Price of U.S. oil increases 0.4%
10-year yield eases 2.6 basis points
By Fergal Smith
TORONTO, Nov 28 (Reuters) -The Canadian dollar edged higher against its U.S. counterpart in holiday-thinned trading on Thursday as oil prices rose and investors assessed the chances of Canada avoiding stiff trade tariffs pledged by U.S. President-elect Donald Trump.
The loonie CAD= was trading 0.2% higher at 1.4005 to the U.S. dollar, or 71.40 U.S. cents, moving closer to the roughly 1.3985 level prevailing before Trump vowed on Monday to impose a 25% tariff on imports from Canada and Mexico as one of his first executive orders.
Trump's inauguration is set to take place on Jan. 20.
"Our base case forecast continues to see Canada avoiding the 25% tariff threat in January, but ultimately facing a 10% tariff later next year on all non-energy goods, with potentially a few other exceptions like autos and parts," Royce Mendes, managing director and head of macro strategy at Desjardins, said in a note.
The Mexican peso MXN= also notched gains as Mexico's President Claudia Sheinbaum said she and Trump had agreed to maintain a good relationship in a friendly phone call that appeared to ease tensions between the top trading partners.
Canada's federal government and the premiers of the 10 provinces agreed to work in a united and coordinated way against the tariff threat, Finance Minister Chrystia Freeland said on Wednesday.
The price of oil, one of Canada's major exports, rose 0.4% to $68.99 a barrel after Israel and Lebanese armed group Hezbollah traded accusations that their ceasefire had been violated.
U.S. stock and bonds markets were shut for the Thanksgiving holiday.
Canada's third-quarter gross domestic product report, due on Friday, could offer clues on the pace of further Bank of Canada interest rate cuts. Economists forecast growth slowing to an annualized rate of 1%.
The Canadian 10-year yield CA10YT=RR eased 2.6 basis points to 3.220%, its fifth straight day of declines.
Reporting by Fergal Smith, editing by Deepa Babington
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