TORONTO (Reuters) - The Canadian dollar gave up early gains to settle slightly higher against the U.S. currency on Monday as oil prices slipped from recent highs and investors returned from a long holiday weekend to strong Chinese growth data and softer U.S. data.
“It’s a very quiet market that’s getting kicked around by some flows,” said Brad Schruder, director of corporate sales and structuring at Bank of Montreal.
“Europe is closed and North America is coming back from a long weekend,” he added. “You’re really not looking at anything directional or strategic.”
The loonie, as Canada’s currency is colloquially known, caught a boost early in the session after data showed China’s economy expanded faster than expected in the first quarter, with industrial output up by the most in more than two years.
Demand for industrial metals and other materials in China can support the commodity-linked Canadian currency.
The Canadian dollar CAD=D4 ended the day changing hands at C$1.3316 to the greenback, or 75.09 U.S. cents, slightly stronger than Thursday’s close of C$1.3328, or 75.03 U.S. cents.
The currency’s strongest level of the session was C$1.3264, while its weakest level was C$1.3321.
BMO’s Schruder said pricing should get more indicative closer to Friday’s release of Canadian inflation data.
He said further evidence of economic strength in upcoming Canadian data coupled with oil prices remaining above $50 a barrel could provide a tailwind for the Canadian currency in coming weeks, notwithstanding any further heightening of geopolitical tension.
Global risks remained in focus during the session, as U.S. Vice President Mike Pence warned North Korea not to test President Donald Trump’s resolve after a failed ballistic missile test.
U.S. retail sales fell for the second straight month in March and consumer prices dropped for the first time in just over a year, a report from the Commerce Department showed on Friday, when North American markets were closed.
Canadian government bond prices turned flat to lower across the maturity curve, with the two-year CA2YT=RR ending down half a Canadian cent to yield 0.731 percent and the benchmark 10-year CA10YT=RR off 17 Canadian cents to yield 1.514 percent.
The Canadian two-year bond was yielding 47 basis points less than its U.S. counterpart. The spread was the narrowest since late February.
Crude oil prices slipped 1 percent on Monday in subdued trading after the Easter holiday weekend, on news of rising U.S. shale production and profit-taking following three straight weeks of gains. [O/R]
Reporting by Alastair Sharp; editing by Diane Craft