CANADA FX DEBT-Canadian dollar extends weekly decline as factory downturn lengthens

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Canadian dollar falls 0.1% against the greenback

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Currency heads for 0.5% weekly decline

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Factory PMI remains below 50 no-change mark

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10-year yield rises 3.7 basis points to 3.472%

By Fergal Smith

TORONTO, Jan 2 (Reuters) - The Canadian dollar added ?to its weekly decline against the U.S. dollar on Friday as domestic data showed ?that the manufacturing sector contracted for an 11th straight month in ?December.

The loonie was trading 0.1% lower at ?1.3740 per U.S. dollar, ?or 72.78 U.S. cents, after moving in a range of 1.3701 to 1.3747.

For ?the week, the currency was on ?track to decline 0.5%. It was up 4.8% for the year just ended.

"Canada's economy starts 2026 under ?a cloud as underlying domestic ?demand remains ?weak," economists at TD Economics, including Andrew Hencic, said in a note.

"Trade losses with the U.S. have been primarily ?offset by gains in resource, metals, and agricultural trade, while key manufactured goods still face tariff challenges." The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) edged up to 48.6 last month from 48.4 in November, extending its streak of readings below the ?50 ?threshold since February. A reading below 50 indicates contraction in the sector. The price of oil, one of Canada's major ?exports, fell 0.7% to $57.00 a barrel as investors weighed oversupply concerns against geopolitical risks. The U.S. dollar kicked off 2026 on a stronger note after struggling against most currencies last year, as traders awaited a flurry of U.S. economic data next week, including several reports on the labor market, ?to gauge the path of interest rates.

Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 3.7 basis points at ?3.472%. (Reporting by Fergal Smith in Toronto; Editing by Matthew Lewis)