Canadian dollar rattled by weak retail sales data

Wed Apr 23, 2008 5:16pm EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar closed at its lowest level versus the U.S. dollar in just over a week on Wednesday after data released early in the day showed an unexpected drop in February retail sales.

Canadian bond prices edged higher on the short end of the curve due to the economic data, but longer-dated bond prices fell alongside the bigger U.S. Treasury market.

The Canadian dollar closed at C$1.0173 to the U.S. dollar, or 98.30 U.S. cents, down from C$1.0080 to the U.S. dollar, or 99.21 U.S. cents, at Tuesday's close.

The Canadian dollar fell to a session low of C$1.0215 to the U.S. dollar, or 97.89 U.S. cents, on the fall in retail sales, which was the first in five months.

According to Statistics Canada, Canadian retail sales fell 0.7 percent in February, well below expectations of analysts who had forecast, on average, that sales would inch up by 0.1 percent.

"Lately the market has tended to have a minimal reaction to the positive data and more of a reaction based on negative data," said George Davis, chief technical strategist at RBC Capital Markets.

"So when we have weaker-than-expected domestic numbers we tend to see the Canadian dollar sell off to a larger degree than it tends to rally when we get stronger-than-expected numbers."

The retail figures followed after the Bank of Canada cut its lending key rate by 50 basis points to 3 percent on Tuesday in a bid to help bolster Canada's economy in the face of the U.S. downturn.   Continued...