CANADA FX DEBT-Canadian dollar touches nearly three-month high after surprise trade surplus

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Canadian dollar gains 0.2% against the greenback

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Touches its strongest level since September 17 at 1.3757

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Canada posts trade surplus in September

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Canada-US 10-year spread touches narrowest since September 2024

By Fergal Smith

TORONTO, Dec 11 (Reuters) - The Canadian dollar strengthened to nearly a three-month high against its U.S. counterpart on Thursday as the greenback posted broad-based declines and Canada's international trade data added to evidence the domestic economy has withstood the initial shock of the trade war.

The loonie was trading 0.2% higher at 1.3765 per U.S. dollar, or 72.65 U.S. cents, after touching its strongest intraday level since September 17 at 1.3757. Canada posted a monthly trade surplus of C$153 million ($110.92 million) in September, reversing a trend of seven consecutive months of deficits. Economists had forecast a C$4.5 billion deficit.

"Near-term progress will be far from linear, but it is reasonable to believe that peak negative impacts from tariffs are in the rearview mirror," Marc Ercolao, an economist at TD Economics, said in a note. "The key risk moving forward is how the trade backdrop will shake out as the U.S., Canada and Mexico prepare for a complex USMCA review."

The United States-Mexico-Canada Agreement, which has shielded much of Canada's exports from U.S. tariffs, is up for joint review in 2026. On Wednesday, Bank of Canada Governor Tiff Macklem said the economy was proving resilient overall to the effect of U.S. trade measures as the Canadian central bank left its benchmark interest rate on hold at 2.25%.

"The BoC's steady stance should continue to support the loonie going forward, even as the greenback softens," strategists at Monex Europe said in a note. The U.S. dollar fell against a basket of major currencies after the Federal Reserve cut interest rates on Wednesday and delivered a less hawkish outlook than some observers had expected. The price of oil, one of Canada's major exports, was trading 1.8% lower at $57.41 a barrel as investors focused on Russia-Ukraine peace talks.

Canadian bond yields edged lower across the curve, tracking moves in U.S. Treasuries.

The 10-year was down 1.2 basis points at 3.411%, while the gap between it and the U.S. equivalent narrowed by 3.2 basis points to about 71 basis points in favor of the U.S. note. That gap is the narrowest since September 2024. (Reporting by Fergal Smith; Editing by Paul Simao)