Dollar edges higher after weak U.S. data

Tue Jan 15, 2008 9:37am EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar climbed against a generally weaker U.S. dollar on Tuesday morning as retail sales data from south of the border missed expectations and weighed on the greenback.

Domestic bond prices, with no Canadian economic data to consider, took their cue from the bigger U.S. treasury market and were higher across the curve as the data maintained calls for a U.S. Federal Reserve rate cut.

At 9:25 a.m., the Canadian dollar was at 98.50 U.S. cents, valuing a U.S. dollar at C$1.0152, up from 98.22 U.S. cents, or C$1.0181, at Monday's close.

But the Canadian currency was off the earlier high of 98.77 U.S. cents it hit ahead of the retail sales data given the close link between Canadian exports and U.S. demand.

"Anything that reflects poorly on U.S. domestic demand is going to reflect poorly on Canadian exports, and as a result of that is going to be reflected in potential weakness in the Canadian dollar," said David Watt, senior currency strategist at RBC Capital Markets.

Watt also suggested the retail sales data didn't spark a bigger Canadian dollar gain since retailers will still be able to register sales as people redeem gift cards in the new year.

The rise in the Canadian dollar helped it reclaim a portion of the 1.8 percent slide suffered last week when a string of domestic data all but locked in a Bank of Canada rate cut.

The Bank of Canada is widely expected to cut its key rate by 25 basis points to 4.00 percent when it next sets monetary policy on January 22.   Continued...