Canadian dollar sags on weak retail sales data

Tue Jul 22, 2008 10:00am EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar fell 0.3 percent against the U.S. dollar on Tuesday, after retail sales data for May came in slightly weaker than expected.

Domestic bond prices rose on the data, but then tracked the U.S. market lower after hawkish comments on inflation by a U.S. Federal Reserve member.

At 9:15 a.m., the Canadian dollar was at C$1.0040 to the U.S. dollar, or 99.60 U.S. cents, down from C$1.0014 to the U.S. dollar, or 99.86 U.S. cents, at Monday's close.

The currency hovered around parity for much of the overseas session, but then fell to a session low of C$1.0062 shortly after the May retail sales numbers were released.

Statistics Canada said soaring gasoline prices drove up Canadian retail sales by 0.4 percent in May from April but gains were limited by weak clothing-store sales. Excluding autos, sales rose by 0.4 percent.

Analysts surveyed by Reuters had expected a median increase of 0.6 percent in overall retail sales and a 0.8 percent increase excluding auto sales.

"There was an expectation that due to price increases, above all else, there would be a stronger reading in May, as many of the activity numbers that are measured in nominal terms have been boosted by sharp price increases," said Adam Cole, head currency strategist at RBC Capital Markets, in London.

May data for manufacturing shipments and wholesale trade, released recently, had both beat expectations.   Continued...