TORONTO (Reuters) - The Canadian dollar pared early gains to trade flat against its U.S. counterpart on Tuesday after data showed U.S. consumer confidence in November rose to a four-and-a-half-year high.
The Canadian currency typically responds positively to signs of growth in the economy of its southern neighbor and biggest export market, and one analyst said the move might have more to do with repositioning after a bounce in light trading last week.
“All the economic data that’s been released this morning, at least in the U.S. session, generally met or exceeded expectations,” said David Tulk, chief Canada macro strategist at TD Securities, referring to the consumer confidence index, house price data and gauges of planned business spending and manufacturing activity.
“So from that perspective, I‘m inclined to think of this as more of a couple of weeks worth of moves that’s being dealt with as opposed to just a momentary reaction to the data.”
Investors also let out a sigh of relief after the International Monetary Fund (IMF) and Greece’s euro zone neighbors brokered a deal to cut Greek debt.
After 12 hours of talks, global lenders agreed on a package of measures to reduce Greek debt to 124 percent of gross domestic product by 2020 and promised further measures to lower it below 110 percent in 2022.
“The agreement overnight has buoyed risk-sensitive currencies and we are seeing that flow into the Canadian dollar,” said John Curran, senior vice president at CanadianForex.
At 12:39 a.m. (1739 GMT), the currency was trading at C$0.9933 to the U.S. dollar, or $1.0067, only slightly stronger than Monday’s North American close of C$0.9938, or $1.0062.
The currency at one point hit C$0.9906, its strongest since November 7.
Canada’s dollar showed broad strength, outperforming most other major currencies, including the euro, Japanese yen and fellow commodities-linked currencies, the Australian and New Zealand dollars.
Curran said the currency would likely trade between C$0.9875 and C$0.9950 on Tuesday. He expected some U.S. dollar buying interest around C$0.9880 to C$0.9900.
“There’s still longer term players looking to deleverage their long-Canada positions just due to the ongoing fact that our economic data has not been too great. And those are longer-term factors. What’s helping the Canadian dollar are short-term factors,” said Curran.
“If we continue to see the Canadian economy losing steam, you will see a selloff in the Canadian dollar. You have those two opposing forces at each other.”
Prices for Canadian government debt were mixed, with the two-year bond shedding half a Canadian cent to yield 1.106 percent and the benchmark 10-year bond adding half a cent to yield 1.755 percent.
Additional writing by Alastair Sharp. Editing by Andre Grenon