Canadian dollar shaken after weak retail data

Fri Feb 22, 2008 9:52am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was knocked lower versus the U.S. dollar on Friday morning after a domestic retail sales report missed expectations and supported the case for more Bank of Canada rate cuts.

Domestic bond prices were lower across the curve.

At 9:40 a.m. the Canadian unit was at C$1.0123 to the U.S. dollar, or 98.78 U.S. cents, down from C$1.0013 to the U.S. dollar, or 99.87 U.S. cents, at Thursday close.

The fall in the Canadian currency immediately followed data that showed December was a disappointing month for retailers in Canada aside from the auto sector.

Retail sales rose a softer-than-expected 0.6 percent in December, but outside the auto sector sales fell for the first time in five months, down 0.4 percent, compared with estimates calling for a 0.4 percent rise.

"This provides the Bank of Canada comfort that they can cut interest rates aggressively and have no worries because the Canadian dollar is basically carrying the burden of keeping inflation under control," said David Watt, senior currency strategist at RBC Capital Markets.

"The reaction was right for the Canadian dollar to weaken off on the headline, but the underlying picture of retail sales in Canada is not that its weakening, so there should be no negative momentum carry through for the Canadian dollar."

The Bank of Canada cut its key rate by 25 basis points in December and January to 4.00 percent and is expected to cut again when it sets interest rates on March 4.   Continued...