* Canadian dollar at C$1.2873, or 77.68 U.S. cents* Oil prices fall 1.1 percent* Bond prices lower across the yield curveTORONTO, April 2 (Reuters) - The Canadian dollarstrengthened against its U.S. counterpart on Monday as thegreenback broadly fell and investors weighed the possiblerepercussions of an escalating trade dispute between the world'sbiggest economies.The U.S. dollar retreated against a basket of majorcurrencies, paring some of last week's gains. China has increased tariffs by up to 25 percent on 128 U.S.products in response to U.S. duties on imports of aluminium andsteel. A global trade war could hurt Canada's commodity-linkedeconomy.
The price of oil, one of Canada's major exports, fell evenas investors weighed a drop in drilling activity in the UnitedStates and the potential for Washington to reintroduce sanctionsagainst Iran. U.S. crude prices were down 1.1 percent to $64.2 abarrel.At 9:42 a.m. EST (1342 GMT), the Canadian dollar was trading 0.2 percent higher at C$1.2873 to the greenback, or77.68 U.S. cents. The currency traded in a range of C$1.2864 toC$1.2910.Gains for the loonie came as data showed the pace of growthin the Canadian manufacturing sector firmed in March. The MarkitCanada Manufacturing Purchasing Managers' index, a measure ofmanufacturing business conditions, increased to a seasonallyadjusted 55.7 last month from 55.6 in February. Still, the loonie fell 2.4 percent against the greenback inthe first quarter.Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as investors turnedattention to Friday's U.S. and Canadian jobs data.The two-year fell 3 Canadian cents to yield 1.794percent and the 10-year declined 27 Canadian centsto yield 2.126 percent.On Thursday, the 10-year yield touched its lowest intradaysince Jan. 4 at 2.073 percent. (Reporting by Fergal Smith; Editing by David Gregorio)
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