Canadian dollar sags as data strengthen greenback

Thu Dec 13, 2007 10:23am EST
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TORONTO (Reuters) - The Canadian dollar sagged against a stronger U.S. dollar on Thursday as some much stronger-than-expected U.S. data eased market nerves regarding the chances of a U.S. recession, overshadowing several pieces of solid Canadian data.

Canadian bond prices fell after the data releases, which included a surprise to the upside for Canadian manufacturing sales, despite the drag of the strong Canadian dollar.

At 9:54 a.m. the Canadian dollar was at C$1.0150 to the U.S. dollar, or 98.52 U.S. cents, down from C$1.0132 to the U.S. dollar, or 98.70 U.S. cents, at Wednesday's session close.

Statistics Canada said on Thursday that Canadian manufacturing sales unexpectedly inched 0.1 percent higher in October as strong sales in aerospace and other sectors offset weakness in the auto industry.

Analysts in a Reuters survey had expected factory sales to decline by 1 percent, due to the strong Canadian currency and the slowdown in the U.S. economy.

But while the Canadian manufacturing numbers were seen by many as a pleasant surprise, they were mostly overshadowed by U.S. data on retail sales and producer prices which came in much higher than the market anticipated.

"Certainly, the retail sales being so strong, I think that was a bit of a shocker and gave the U.S. dollar a bit of a boost," said Steve Butler, director of foreign exchange at Scotia Capital.

The data showed that U.S. consumers are still spending, easing market concerns that the ongoing credit crunch and the U.S. housing crisis could push the world's biggest economy into a recession.

Other Canadian data included labor productivity, which grew by 0.2 percent in the third quarter, in line with expectations but well below the U.S. rate of 1.6 percent.   Continued...