C$ posts weekly gain, with BoC rate cuts seen priced in

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar steadied against its broadly stronger U.S. counterpart on Friday as domestic data showed an increase in factory sales and investors judged that expected Bank of Canada interest rate cuts have been built into the currency's outlook.

The loonie was trading nearly unchanged at 1.3740 to the U.S. dollar, or 72.78 U.S. cents, after moving in a range of 1.3728 to 1.3779.

The currency posted a modest weekly gain of 0.2% even after hitting on Tuesday its weakest intraday level in nearly two months at 1.3791.

"I think USD-CAD is still vulnerable to some upside swings out there but it's not in a hurry," said Amo Sahota, director at Klarity FX in San Francisco.

"The market is really focused on U.S. (currency) trade flow right now ... For Canada, the drivers of expecting lower interest rates - that's a checked box."

The U.S. dollar rose against a basket of major currencies as political uncertainty weighed on the euro.

The BoC last week became the first G7 central bank to ease monetary policy, cutting its benchmark rate by 25 basis points to 4.75%.

Money markets expect another rate cut in July but have also moved to price in two rate cuts this year from the Federal Reserve, after recent data showed a cooling in U.S. inflation.

Canadian factory sales grew by 1.1% in April from March on higher sales of motor vehicles, as well as primary metals, Statistics Canada said. Separate data for April showed wholesale trade advancing 2.4%.

The price of oil, one of Canada's major exports, settled 0.2% lower at $78.45 a barrel, giving back some of its weekly gain.

Canadian bond yields fell across a flatter curve. The 10-year was down 4.3 basis points at 3.285% after earlier touching its lowest since Feb. 2 at 3.260%.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)