Loonie edges lower on surprise drop in factory sales

TORONTO (Reuters) - The Canadian dollar weakened slightly against the greenback on Tuesday, retreating from a near seven-week high the day before, as worries about Brexit resurfaced and domestic data showed a surprise decline in manufacturing shipments.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

Canadian factory sales decreased by 0.7% in October from September as the United Auto Workers’ strike in the United States weighed on transportation equipment sales, Statistics Canada said. Analysts had forecast no change.

“We had some weak manufacturing numbers,” said Hosen Marjaee, senior portfolio manager at Manulife Asset Management. “That took a little bit of wind out of our (the loonie’s) sails.”

The Bank of Canada has said that it will take into account the impact on the economy of trade conflicts when making its interest rate decisions.

Clues for the rate outlook could come from Canada’s inflation report for November, which is due for release on Wednesday.

The U.S. dollar .DXY rose against a basket of major currencies amid concerns about Britain's setting a hard deadline to reach a new trade deal with the European Union.

At 2:56 p.m. (1956 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.3164 to the greenback, or 75.96 U.S. cents. The currency traded in a range of 1.3147 to 1.3185.

On Monday, the loonie notched its strongest intraday level since Oct. 30 at 1.3115 after a trade deal between the United States and China.

Hopes that the U.S.-China trade deal will bolster oil demand in 2020 and the prospect of lower U.S. crude supplies supported the price of oil, one of Canada's major exports. U.S. crude oil futures CLc1 were up 1.20% at $60.93 a barrel.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 2.5 Canadian cents to yield 1.708% and the 10-year CA10YT=RR falling 9 Canadian cents to yield 1.643%.

On Friday, the 10-year yield touched its highest intraday level in nearly seven months at 1.695%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney