April 24, 2012 / 12:47 PM / in 6 years

Canadian dollar flat; domestic retail sales weigh

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Tuesday, supported by steady global equity and currency markets but weighed down by a softer domestic retail sales report.

An illustration picture shows Canadian banknotes of five Dollars in Reykjavik March 6, 2012. REUTERS/Ingolfur Juliusson

Disappointing car sales led to an unexpected 0.2 percent fall in Canada’s retail trade in February, the same month the motor vehicle business actually boosted wholesale trade, Statistics Canada said on Tuesday.

Making for an even soggier reading, the volume of sales, used in calculating real gross domestic product (GDP), slumped by 0.6 percent from January. And January’s retail sales gain was revised down to 0.2 percent from 0.5 percent.

“There’s cause to believe that it was a bit premature to be talking rate hikes in the current fragile environment, and a weak retail sales print supports that thesis,” said Derek Holt, vice president of economics at Scotiabank.

“It’s a bit disconcerting at this juncture.”

At around 9:05 a.m. (1305 GMT), the Canadian dollar firmed to C$0.9910 against the greenback, or $1.0091, unchanged from its North American finish on Monday.

Last week the Bank of Canada kept its key lending rate on hold at 1 percent, but in a surprisingly hawkish tone signaled to the market it may need to start raising interest rates, given reduced slack in the economy.

The Bank of Canada will again be in focus later Tuesday. Central Bank Governor Mark Carney will testify before a parliamentary committee, with many market watchers expecting him to reiterate a more positive outlook for the economy.

Currency moves mirrored the relatively flat performance in global equity and currency markets. European shares and the euro recovered slightly after government debt auctions saw good demand. But the growing economic slump in the euro zone and resistance to austerity kept safe-haven German bonds near record lows. <MKTS/GLOB>

Canadian government bond prices were mixed with the 2-year bond down 2 Canadian cents to yield 1.371 percent. The benchmark 10-year bond edged 4 Canadian cents higher to yield 2.045 percent.

Reporting By Jennifer Kwan; editing by Jeffrey Benkoe

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