TORONTO (Reuters) - The Canadian dollar was higher against a generally weaker U.S. dollar on Tuesday while lofty oil prices and a stronger-than-expected piece of domestic data also helped beef up the currency’s gain.
Domestic bond prices were all higher after data released overnight heightened economic growth concerns.
At 9:20 a.m. (1320 GMT), the Canadian currency was trading at US$1.0091, valuing a U.S. dollar at 99.10 Canadian cents, up from US$1.0002, valuing a U.S. dollar at 99.98 Canadian cents.
During the overnight session the Canadian dollar climbed to US$1.0128, valuing a U.S. dollar at 98.74 Canadian cents, its highest level since March 17.
The Canadian dollar eventually eased off its overnight high but it rebounded slightly after domestic data showed wholesale trade rose 0.6 percent in March, which was better than the 0.4 percent analysts surveyed by Reuters had forecast.
But the bounce was limited as the data also showed real wholesale sales fell by 0.1 percent during the month.
“It is helping as we saw the Canadian dollar rally, but there was no real follow through after the data because real wholesale sales were down 0.1 (percent),” said Matthew Strauss, senior currency strategist at RBC Capital Markets.
“What has been helping the Canadian dollar generally speaking is the broad-based U.S. dollar weakness which saw the U.S. dollar weaken against most of the other currencies.”
The commodity-linked Canadian dollar, coming off a 0.6 percent gain last week, also drew support from record oil prices. U.S. crude futures were at a record $128 a barrel and London Brent Crude hit a record of $126.35 a barrel.
Canada is a major oil producer and exporter and its currency often follows prices for the commodity, a trend that has started to regain momentum in recent weeks.
“The big driver during the last few weeks, still very much with us, is elevated oil prices,” said Strauss. “So that’s still providing a positive backdrop for the Canadian dollar.”
Domestic data still due this week include April inflation data and April leading indicators on Wednesday, and the March retail sales report on Thursday.
Also, Bank of Canada Governor Mark Carney is scheduled to give a speech on “Principles for Liquid Markets” in New York on Thursday to the New York Association for Business Economics. His speech will be followed by a news conference.
Canadian bond prices were all higher across the curve as a slide in equity markets overnight heightened investors’ appetite for more secure assets like government debt.
Equity markets were down after data showed German investor sentiment unexpectedly worsened in May, which added to economic growth concerns.
“Bond (prices) benefited from the weakness overnight in overseas equity markets,” said Sal Guatieri, senior economist at BMO Capital Markets. “And also just continued fears of oil prices at record highs and what that could mean for the (global) economy.”
Other domestic data showed foreign investors bought C$5.30 billion worth of Canadian securities in March, while Canadians divested C$3.3 billion worth of foreign securities in the same month.
The overnight Canadian Libor rate LIBOR01 was 3.0483 percent.
Friday’s CORRA rate CORRA= was 3.0295 percent, up from 2.9899 on Thursday. The Bank of Canada publishes the previous session’s rate at around 9 a.m. daily.
The two-year bond was up 2 Canadian cents at C$101.88 to yield 2.789 percent. The 10-year rose 15 Canadian cents to C$103.40 to yield 3.556 percent.
The yield spread between the two- and 10-year bonds was 76.7 basis points, down from 77.7 at the previous close.
The 30-year bond increased 6 Canadian cents to C$116.35 for a yield of 4.038 percent. In the United States, the 30-year Treasury yielded 4.556 percent.
The three-month when-issued T-bill yielded 2.60 percent, down from 2.61 percent at the previous close.
Editing by Bernadette Baum