CANADA FX DEBT-C$ hits 1-month high vs US$ on strong retail sales

Tue Jul 23, 2013 10:18am EDT
 
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* C$ at C$1.0308 to US$, or 97.01 U.S. cents
    * Strengthens to one-month high after strong retail sales
    * Bonds prices mixed

    By Andrea Hopkins
    TORONTO, July 23 (Reuters) - The Canadian dollar hit a
one-month high against its U.S. counterpart on Tuesday after
stronger-than-expected domestic retail sales data fed
expectations of extended economic growth.
    Higher auto sales helped drive Canadian retail sales 1.9
percent higher in May from April, the biggest monthly jump for
more than three years and far greater than the 0.4 percent
growth predicted by market operators. 
    "We did see the currency getting a lift off the back of what
seemed to be a fairly stunning set of sales numbers, and it
wasn't just one sector it was pretty much all sectors, apart
from electronics and jewelry, so it was a pretty significant
across-the-board improvement," said Jeremy Stretch, head of
foreign exchange strategy for CIBC World Markets in London.
     He said the data could signal higher-than-expected economic
growth data for the second quarter. 
     Canada's economy grew 2.5 percent at annual rate in the
first quarter.
     At 9:40 a.m., the Canadian dollar was trading at
C$1.0308 to the greenback, or 97.01 U.S. cents, stronger than
Monday's North American session close at C$1.0344, or 96.67 U.S.
cents. 
    It climbed as high as C$1.0298 to the U.S. dollar, or 97.11
U.S. cents, shortly after the retail data was released, to touch
its strongest level since June 20.
    Stretch said the Canadian currency could test the C$1.03
level again and push as strong as C$1.0270, especially given the
dearth of other global data to move markets.
    On the flip side, a renewed spike in U.S. bond yields could
push the currency weaker, but that seemed less likely than more
strength for the loonie, Stretch said.
    "That would probably have to be a function of U.S. yields
squeezing back up through the session highs north of 253 in
10-years, but if we were to see that sort of level clearly that
would see us attempting that session high at C$1.0350, towards
C$1.0368, the high from yesterday, but I don't see that as
likely," Stretch said.
    The U.S. dollar in recent weeks has gained broadly as yields
spiked in anticipation of a reduction in monetary stimulus, with
the Canadian currency managing to stick with the greenback and
gain against some other currencies.
    The price of Canadian government debt was mixed across the
curve, with the two-year bond down 5.5 Canadian cents
to yield 1.118 percent and the benchmark 10-year bond
 falling 39 Canadian cents to yield 2.406 percent.