November 23, 2017 / 9:42 PM / 3 years ago

CANADA FX DEBT-C$ pulls back from 10-day high on tepid retail sales gain

 (Adds banker quote and background details, updates prices)
    * Canadian dollar at C$1.2718, or 78.63 U.S. cents
    * Loonie touches its strongest since Nov. 13 at $1.2673
    * Canadian retail sales rise 0.1 percent in September
    * Bond prices higher across a steeper yield curve

    By Fergal Smith
    TORONTO, Nov 23 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Thursday, pulling back from an
earlier 10-day high, after domestic data showed retail sales
rose far less than expected in September. 
    The 0.1 percent increase was short of economists' forecasts
for a gain of 0.9 percent, while volumes fared worse, declining
by 0.6 percent.             
    "There are vulnerabilities in the (Canadian) economy," said
Scott Lampard, head of Global Markets, HSBC Bank Canada. "If the
consumer starts to crack ... that could expose some of these
    The Bank of Canada has worried about the impact of higher
interest rates on heavily indebted Canadians.
    The central bank raised interest rates in July and September
for the first time in seven years but has since turned more
cautious about the outlook for the domestic economy.
    Chances of another hike by the bank's March meeting dipped
to 54 percent from 60 percent before the retail sales data, the
overnight index swaps market indicated.           .
    Investors will be looking to a speech by Bank of Canada
Governor Stephen Poloz in December for clues on prospects for
more rate hikes.
    At 4 p.m. (2100 GMT), the Canadian dollar          was
trading at C$1.2718 to the greenback, or 78.63 U.S. cents, down
0.1 percent.
    The currency's weakest level of the session was C$1.2730,
while it touched its strongest since Nov. 13 at $1.2673.
    The currency weakened despite higher prices for oil, one of
the country's main exports.
    U.S. crude        reached a two-year high at $58.58 a barrel
as the shutdown of a major crude pipeline from Canada and a draw
on fuel inventories pointed to a tightening market.            
    Still, strong inflows of foreign money into Canadian stocks
and bonds this year are adding to investor confidence that the
rally since May in the country's currency is sustainable because
it is not just supported by speculative flows.             
    Canadian government bond prices were higher across a
slightly steeper yield curve, with the two-year            up 4
Canadian cents to yield 1.435 percent and the 10-year
            rising 11 Canadian cents to yield 1.892 percent.
    U.S. markets were closed for the Thanksgiving holiday.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
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