CANADA FX DEBT-Canadian dollar clings to third straight weekly gain

By Fergal Smith

TORONTO, March 21 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday as domestic data showed retail sales declining in the first two months of 2025 and tariff uncertainty lingered, but the currency was holding on to a modest weekly gain.

The loonie CAD= was trading 0.1% lower at 1.4340 per U.S. dollar, or 69.74 U.S. cents, after trading in a range of 1.4314 to 1.4373. For the week, the currency was up 0.2%, which would be its third straight weekly gain.

The Canadian dollar is likely to continue trading in a somewhat flat range for now "as markets await clarity" on proposed U.S. tariffs, Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

Wall Street clawed back some of its declines after U.S. President Donald Trump hinted there would be some flexibility regarding tariffs.

Trump has promised tariffs on autos beginning April 2, alongside a more sweeping agenda of reciprocal tariffs. Earlier this month, he suspended until April 2 tariffs of 25% he had imposed on most goods from Canada.

"In terms of the implications for Canada, misery loves company," Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note.

"Both the impacts on our exports to the US, as well as our odds of negotiating these tariffs down to a manageable size, would be improved by having many other US trading partners in the same boat."

Canadian retail sales shrank 0.6% month-over-month in January after December's purchases were bumped up by a sales tax break which ended in the middle of last month. A preliminary estimate for February showed sales down 0.4%.

The Canadian 10-year CA10YT=RR yield was trading nearly unchanged at 3.016%, while it was trading 1.3 basis points further above the 2-year yield CA2YT=RR at a spread of 49.6 basis points, its widest since February 2022.