Canadian dollar climbs to 6-week high as OPEC+ cuts output

TORONTO (Reuters) - The Canadian dollar strengthened to near a six-week high against its U.S. counterpart on Monday as a jump in oil prices offset data showing that Canadian manufacturing activity contracted in March after two months of expansion.

The price of oil, one of Canada's major exports, posted its biggest daily rise in nearly a year, after a surprise announcement by OPEC+ to cut more production jolted markets.

U.S. crude prices were up 6.2% to $80.39 a barrel, while the Canadian dollar advanced 0.5% to 1.3442 per greenback, or 74.39 U.S. cents, its strongest level since Feb. 21.

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 48.6 in March from 52.4 in February, its lowest level since June 2020, as economic uncertainty weighed on output and new orders, offsetting easing supply pressures as well as rising optimism about future growth.

The Bank of Canada is due to release the first-quarter issue of the Business Outlook Survey at 10:30 a.m. EDT (1430 GMT), which could offer further clues on the state of the domestic economy.

The central bank is due to make an interest rate decision and update its economic forecasts on April 12.

Canadian government bond yields were higher across the curve.

The 10-year rose 4.6 basis points to 2.945%, while the gap between it and its U.S. equivalent narrowed by 3.9 basis points to 55.2 basis points in favor of the U.S. bond.

(Reporting by Fergal Smith; Editing by Paul Simao)