CANADA FX DEBT-C$ falls to six-week low after soft retail data

Thu Aug 22, 2013 5:13pm EDT
 
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* C$ at C$1.0516 vs US$, or 95.09 U.S. cents
    * Retail sales fall by a larger-than-expected 0.6 pct
    * Inflation data could push C$ to C$1.06 - strategist

    By Alastair Sharp
    TORONTO, Aug 22 (Reuters) - The Canadian dollar slipped to
its weakest level in six weeks against its U.S. counterpart on
Thursday, pressured in part by softer-than-expected Canadian
retail sales data.
    The fall was the fifth-straight decline for the loonie, as
Canada's currency is colloquially known.
    "We've moved almost two full cents in four days. That's a
meaningful movement in my book, especially given we've been more
or less range-bound for a while," said Benjamin Reitzes, senior
economist and foreign exchange strategist at BMO Capital
Markets.    
    Retail sales fell 0.6 percent in June after a 1.8 percent
gain in May, according to Statistics Canada, foreshadowing a
greater fall in gross domestic product than initially thought.
Economists expected sales to fall 0.4 percent. 
    The Canadian dollar ended at C$1.0516 against the
greenback, or 95.09 U.S. cents, off 0.4 percent from Wednesday's
North American finish of C$1.0473, or 95.48 U.S. cents. It was
the currency's weakest close since July 9.
    Reitzes said the loonie could weaken even further if
domestic CPI data due out on Friday disappoints, although an
early July high just above C$1.06 should provide stiff
resistance.
    "We're expecting inflation to pick up, but inflation has
tended to be pretty consistently weak," he said.
    The U.S. dollar also extended gains as Wednesday's release
of the Federal Reserve's July policy meeting minutes did not
alter market expectations that the central bank will begin
scaling back its stimulus program next month. 
    "A September taper has become the global view ... the wider
narrative we've always talked about is that this does lead to
objective U.S. dollar strength and Canada gets caught in the
crossfire," said David Tulk, chief Canada macro strategist at TD
Securities.
     "The other part that makes CAD (the Canadian dollar) an
especially poor performer, even on the crosses, is just looking
at some of the weakness that we have in the Canadian data and
that came out from today's retail sales report."
    The currency underperformed its Australian commodity-linked
dollar, which got an oversized boost from promising
Chinese data, and the euro struck fresh two-year highs on the
back of optimistic business surveys. 
    In the United States, the number of Americans filing new
claims for unemployment benefits rose last week, but held close
to a six-year low and gave a positive signal for hiring during
the month. 
    The price of Canadian government debt rose across the
maturity curve, with the two-year bond adding 3
Canadian cents to yield 1.203 percent, while the benchmark
10-year bond added 15 Canadian cents to yield 2.741
percent.