CANADA FX DEBT-C$ shrugs off weak data, rebounds on U.S. dollar selloff
(Adds details, comment, closing figures) * Canadian dollar at C$1.2579 or 79.50 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, March 20 (Reuters) - The Canadian dollar rallied on Friday as a U.S. dollar selloff against major currencies and higher crude prices overcame the impact of weaker-than-forecast domestic retail sales, which had initially dragged on the currency. The greenback has struggled since a U.S. Federal Reserve statement on Wednesday that signaled a slower approach to raising interest rates than some investors had expected. "It continues to be a U.S. dollar story, except for the oil component," said Rahim Madhavji, president of KnightsbridgeFX.com. "There's definitely been a knee-jerk reaction in the Canadian dollar ... Going forward, the (U.S. and Canadian) central banks still hold all the cards in terms determining where the Canadian dollar will go." Madjavji said the U.S. dollar's broad swings since Wednesday reflect polarizing reactions to the Fed's statement, with some market participants arguing there will be lower rates for longer and others still betting on a June hike. The Canadian dollar finished the session at C$1.2579 against the U.S. dollar, or 79.50 U.S. cents, roughly a cent and a half stronger than Thursday's Bank of Canada close of C$1.2726, or 78.58 U.S. cents. The loonie surged some 2 percent on Wednesday and then lost half of that gain the next day. The currency gained about 1.6 percent for the week. Earlier in the session, data showed that January retail sales fell for a second month, down 1.7 percent to C$41.46 billion, as gasoline sales posted the biggest monthly drop since November 2008 and consumers spent less on new cars. Sales fell in seven of 11 retail subsectors, representing 83 percent of retail trade. "The retail sales miss ... isn't surprising considering that the Bank of Canada had provided guidance that Q1 data was going to be weak," said Brad Schruder, director of foreign exchange at BMO Capital Markets. Inflation data for February was unchanged from January, holding at 1 percent as cheap gasoline prices continued to weigh down the consumer price index. Shortly after the data, the loonie briefly touched C$1.2724, or 78.59 U.S. cents, the weakest level of the session. Canadian government bond prices were higher across the maturity curve, with the two-year adding 3 Canadian cents to yield 0.459 percent and the benchmark 10-year rising 10 Canadian cents to yield 1.304 percent. (Additional reporting by Allison Martell; Editing by Bernadette Baum)
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