By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened to a nine-day low against its U.S. counterpart on Friday before recouping much of its decline, as investors weighed global banking sector stress and data showing some major sectors of Canada's economy weakening in February.
The loonie was trading 0.1% lower at 1.3730 to the greenback, or 72.83 U.S. cents, after touching its weakest level since March 15 at 1.3804. For the week, the currency was barely changed.
The move came as the U.S. dollar rallied against a basket of major currencies and the price of oil, one of Canada's major exports, settled 1% lower at $69.26 a barrel.
"Global risk aversion and equities are in the driver's seat for USD-CAD today," said Jay Zhao-Murray, a market analyst at Monex Canada Inc.
Some dialing back of the "fear trade" helped the loonie pare its decline, Zhao-Murray added.
Wall Street bounced back from an earlier sell-off at the end of a tumultuous week as U.S. Federal Reserve officials calmed investor skittishness over a potential liquidity crisis in the banking sector.
Still, the turmoil has led to investors betting that major central banks, such as the Bank of Canada, will shift to cutting interest rates this year. Money markets see a nearly 40% chance that the central bank will ease at its next policy decision on April 12.
Canadian retail sales rose 1.4% in January, data from Statistics Canada showed. But flash estimates for February showed a decline of 0.6% as well as declines for wholesale trade and manufacturing sales, down 1.6% and 2.8% respectively.
Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries.
The 2-year touched its lowest since August 2022 at 3.254% before recovering to 3.422%, down 3.1 basis points on the day.
(Reporting by Fergal Smith; editing by Jonathan Oatis and Sandra Maler)