TORONTO, March 20 (Reuters) - The Canadian dollar retreated from early gains on Friday as stock markets fell, putting pressure on a currency that had rallied on the back of a U.S. plan to buy up government bonds.
At 2:55 p.m. (1855 GMT), the currency was at C$1.2407 to the U.S. dollar, or 80.60 U.S. cents, down from C$1.2377 to the U.S. dollar, or 80.80 U.S. cents, at Thursday’s close.
Despite the pullback on Friday, the Canadian dollar was still holding solid gains for the week, up about 2.5 percent, stemming from the aftermath of the U.S. Federal Reserve’s announcement that it plans to buy up government bonds.
But Toronto’s main stock index looked set to break its eight-day string of higher closes. The Canadian dollar’s moves have recently been closely linked to the commodity-rich index.
“It’s ending the week on a softer tone given the return of risk aversion with equities selling off,” said Sal Guatieri, senior economist at BMO Capital Markets.
Earlier, the currency was moderately firmer against the greenback after figures showed Canadian January retail sales rose almost twice as much as expected. [ID:nN19306411]
Despite the rare piece of positive economic news, the overall economic landscape still points to a weak reading for gross domestic product data for January due out next week, analysts said.
The retail statistics initially helped push the Canadian dollar towards its overnight high of C$1.2292 to the U.S. dollar, or 81.35 U.S. cents, but stopped short. It later hit a session low at C$1.2450 to the U.S. dollar, or 80.32 U.S. cents. (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)