TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday, retreating from an earlier 10-day high as firm U.S. data supported the greenback and domestic manufacturing data disappointed.
Canadian factory sales fell more than expected in May, sliding 1.0 percent from April on weakness in motor vehicles and some energy products.
The U.S. dollar rose against a basket of major currencies after stronger than expected retail sales added to evidence that growth in the U.S. economy has regained momentum after a first-quarter lull.
Still, the Canadian dollar advanced 0.8 percent for the week as a somewhat optimistic update on Wednesday from the Bank of Canada lowered expectations for an interest rate cut.
The implied probability of a rate cut this year fell to 7 percent, overnight index swaps data showed. It had been above 30 percent in the week following the British referendum vote on June 23 to leave the European Union.
Adding to support for Canada’s risk-sensitive currency, the market has taken in stride the Bank of England’s surprise decision on Thursday not to cut interest rates.
“If the Bank of England isn’t crying about the sky falling and cutting rates ... then maybe we have gotten ahead of ourselves a little bit around these Brexit fallout concerns,” said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.
The Canadian dollar ended at C$1.2937 to the greenback, or 77.30 U.S. cents, weaker than Thursday’s close of C$1.2898, or 77.43 U.S. cents.
The currency’s weakest level of the session was C$1.2988, while it touched its strongest since July 5 at C$1.2861.
U.S. crude oil futures settled up 27 cents at $45.95 a barrel after economic data from top energy consumers the United States and China boosted the oil demand outlook. [O/R]
Speculators increased bullish bets on the loonie for the third straight week, Commodity Futures Trading Commission data showed. Net long Canadian dollar positions rose to 17,175 contracts in the week ended July 12 from 11,517 contracts in the prior week.
Canadian government bond prices were lower across the maturity as safe-haven assets such as U.S. Treasuries retreated.
The two-year price fell 5.5 Canadian cents to yield 0.574 percent and the benchmark 10-year declined 33 Canadian cents to yield 1.093 percent.
The 10-year yield has rebounded from a five-month low on Monday at 0.935 percent.
Editing by Lisa Von Ahn