December 20, 2012 / 1:59 PM / in 5 years

Canadian dollar hits session high after strong retail sales

TORONTO (Reuters) - Canada’s currency touched a session high against its U.S. counterpart on Thursday after data showed domestic retail sales jumped much more than expected.

A man holds the new Canadian 100 dollar bill made of polymer in Toronto November 14, 2011. REUTERS/Mark Blinch

Following the data, the Canadian dollar strengthened to C$0.9875 versus the greenback, or $1.0127, compared with C$0.9890, or $1.0111, before the release.

Canada retail sales in October climbed 0.7 percent from September to a record C$39.45 billion ($39.85 billion), thanks to higher sales at motor vehicle dealers and gas stations.

Greg Moore, FX Strategist at TD Securities, said that ahead of the retail sales numbers, the market hadn’t expected a big reaction from the Canadian dollar, as the focus had been more on uncertainty surrounding the U.S. budget crisis.

“That would be the case unless we saw a pretty significant surprise,” said Moore. “This (strong retail sales) was higher than pretty much all forecasters were expecting.”

At 9:20 a.m. (1420 GMT), the currency eased back to C$0.9880, or $1.0121, little changed from Wednesday’s North American session close at C$0.9881, or $1.0120.

Moore noted near-term U.S. dollar resistance versus Canada’s around C$0.9900 and support around C$0.9825-30.

In other data, the U.S. economy grew faster than previously estimated in the third quarter as exports and government spending provided a lift, but that boost is likely to be lost amid slowing global demand and a move towards tighter fiscal policy.

Meanwhile, the number of Americans filing new claims for unemployment aid rose last week, putting them back at the lower end of their pre-storm range and suggesting job growth remains moderate.

Investors were looking to book profit ahead of the holidays following a recent rally to two-month highs, while optimism over a resolution to the U.S. “fiscal cliff” of automatic tax hikes and spending cuts in 2013 also eased after the latest setback in U.S. fiscal talks.

Canadian government bond prices climbed across the curve. The two-year bond was up 2 Canadian cents, yielding 1.133 percent, while the benchmark 10-year bond lost 5 Canadian cents to yield 1.850 percent.

Editing by Bernadette Baum

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