TORONTO (Reuters) - The Canadian dollar eked out small gains against the U.S. currency on Wednesday but moves were limited with many traders unwilling to make big bets due to uncertainty over the U.S. fiscal cliff and aid payments for Greece.
"There are two really major issues that's really driving market anxiety. One is the fiscal cliff and the other issue is Europe," said Mazen Issa, macro strategist at TD Securities.
Investors awaited progress in approving an aid payment to Greece, while a wave of strikes across Europe to protest against spending cuts and tax hikes kept the focus on the region's debt crisis.
U.S. retail sales data for October, which offered an early read on superstorm Sandy's impact on the economy, came in slightly lower than the consensus forecast and added to the cautious sentiment. Sandy's full impact will likely be felt in the November data.
Issa said that markets were more concerned, however, with how the United States will address the fiscal-cliff tax hikes and spending cuts that are set to kick in early next year and threaten to spur a recession.
"That's by and large the main theme that's been filtering through the markets," Issa said.
"You're likely to see range-bound trading until you have more clarity on the fiscal issue ... The day-to-day data is taking a bit of a back seat to the fiscal issue."
At 9:31 a.m. (1431 GMT), the Canadian dollar was trading at C$1.0011 versus the U.S. dollar, or $0.9989. This was slightly firmer than Tuesday's North American finish of C$1.0019, or $0.9981.
The currency is likely to trade between parity and C$1.0030 during the session, Issa said.
Prices for Canadian government debt generally retreated, with the two-year bond falling 4.5 Canadian cents to yield 1.101 percent. The benchmark 10-year bond shed 27.5 Canadian cents to yield 1.724 percent.
Editing by Peter Galloway