CANADA FX DEBT-C$ rises as retail data boosts confidence

Fri Jan 21, 2011 10:09am EST
 
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 * C$ rises as high as C$0.9912, or $1.0089
 * Bond prices weaker across the curve
 * Retail sales rise 1.3 percent
 By Solarina Ho
 TORONTO, Jan 21 (Reuters) - The Canadian dollar
strengthened against the greenback on Friday morning as
Canadian retail sales data came in stronger than expected.
 At 9:39 a.m. (1439 GMT), the currency CAD=D4 was at
C$0.9923 to the U.S. dollar, or $1.0078, firming from C$0.9964
immediately before the data was released. It rose as high as
C$0.9912 after the release of the data.
 "The currency does often respond in a big way to retail
sales and we found that again today ... It was already firming
because of global events. This report is just giving it another
big lift," Doug Porter, deputy chief economist at BMO Capital
Markets
 November retail sales climbed 1.3 percent versus a forecast
of a 0.5 percent increase, with higher auto sales helping the
figure to notch its biggest gain since March 2010. It was the
sixth consecutive month of retail sales gains. [ID:nN21214058]
 "It was surprisingly upbeat ... it was generalized
strength. We also saw an upward revision in the prior month and
the gains weren't due to higher prices, it was all in volume,"
Porter said.
 "Just as it looked like Canadian consumers were starting to
wind down, they actually have picked it right back up again. It
does set a better tone for November GDP."
 The Canadian dollar was already firmer on Friday before the
release of the retail sales figures due to a more upbeat tone
in global markets and firmer commodity prices.
 Oil prices rose as renewed market confidence that the
European debt crisis would be solved pressured the U.S. dollar
lower against the euro and helped spark buying across a range
of commodities. Copper reversed some of its losses from
Thursday, rising more than 1 percent. [O/R] [MET/L]
 Strong earnings and positive news from General Electric
(GE.N: Quote) and Google (GOOG.O: Quote) also boosted investor optimism.
[ID:nLDE70K1GN] [ID:nSGE70K06G]
 "Generally when equity and commodity markets are in a
better mood, so too is the Canadian dollar," Porter said.
 Earlier this week, the Bank of Canada signaled that
sluggish growth and the strong Canadian dollar could mean
keeping interest rates on hold for longer than markets had
expected. [ID:nN19215598] [ID:nN18290983]
 Weaker-than-expected Canadian factory sales added to those
concerns, but healthy wholesale trade data, a gain in the
composite leading indicator on Thursday, and Friday's retail
sales have buoyed views that Canada's fourth-quarter gross
domestic product report could be stronger than predicted.
[ID:nN2083816]
 "One-month retail sales, especially since it's for
November, not December is not a game changer," Porter said. "It
does put a slightly rosier glow on the economy, but I don't
think this would be enough to really change the Bank of
Canada's outlook significantly."
 BONDS DOWN
 Canadian bond prices were weaker across the curve as
investors lost interest in safe-haven debt. [US/]
 The interest rate-sensitive two-year bond CA2YT=RR was
down 3.5 Canadian cent to yield 1.743 percent, while the
10-year bond CA10YT=RR was off 30 Canadian cents to yield
3.343 percent.
 (Reporting by Solarina Ho; editing by Peter Galloway)