February 21, 2020 / 8:35 PM / 6 months ago

CANADA FX DEBT-Loonie posts biggest gain since start of 2020 as U.S. dollar stumbles

    * Canadian dollar rises 0.4% against the greenback
    * Canadian retail sales flatline in December
    * Price of U.S. oil decreases 0.9%
    * Canadian bond yields fall across a flatter yield curve

    By Fergal Smith
    TORONTO, Feb 21 (Reuters) - The Canadian dollar strengthened
to a three-week high against its U.S. counterpart on Friday as
the greenback gave back some recent gains against a basket of
other major currencies and a measure of domestic underlying
retail sales rose in December.
    Canadian retail sales were unchanged in December from
November at C$51.65 billion, undershooting the 0.1% gain that
analysts had expected, data from Statistics Canada showed. But
sales were more robust after excluding motor vehicles and parts
dealers, rising 0.5%.             
    "Retail sales extended the string of disappointing readings
on the Canadian economy, but some of the stripped-down measures
proved more encouraging than the headline," said Royce Mendes, a
senior economist at CIBC Capital Markets.    
    Last month, the Bank of Canada left the door open to an
interest rate cut should a recent slowdown in domestic growth
persist. Investors see about a 50% chance that the central bank
would ease by April.                       
    At 3:09 p.m. EST (2009 GMT), the Canadian dollar         
was trading 0.4% higher at 1.3210 to the greenback, or 75.70
U.S. cents, its biggest gain since Dec. 31. It touched its
strongest intraday level since Jan. 31 at 1.3202.
    For the week, the loonie was up 0.3%, its second straight
weekly advance.
    The U.S. dollar        pulled back from a three-year peak
after a survey of purchasing managers showed U.S. business
activity in the manufacturing and services sectors stalled in
February as companies have grown increasingly concerned about
the coronavirus outbreak.             
    Stocks globally          and the price of oil, one of
Canada's major exports, fell as a rise in new cases of the
coronavirus and weak Asian data fueled uncertainty about the
economic outlook. U.S. crude oil futures        settled 0.9%
lower at $53.38 a barrel.                         
    The virus has stalled talks between Canada and China about
Beijing's decision to block Canadian canola seed shipments,
Agriculture Minister Marie Claude Bibeau said.             
    Canadian Prime Minister Justin Trudeau said he was working
to end rail blockades led by indigenous protesters as farmers
and businesses warned of mounting economic damage after two
weeks of barricades.                  
    Canadian government bond yields were lower across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year yield
            fell 8.1 basis points to 1.273%, nearly its lowest
level since October.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and
Jonathan Oatis)
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