* C$ ends at 97.38 U.S. cents
* Bonds largely flat across curve
* Canadian retail sales up 0.5 pct in August
* Domestic inflation muted (Updates to close, adds quote)
By Jennifer Kwan
TORONTO, Oct 22 (Reuters) - The Canadian dollar was flat versus the U.S. currency on Friday as investors failed to make any major bets either way amid uncertainty about the outcome of a meeting of the G20 leading economies this weekend.
The currency mimicked moves in other markets, including world stocks, which wavered on Friday as traders took profits after this week’s run-up. [MKTS/GLOB]
The U.S. dollar ticked higher against major currencies on uncertainty ahead of the gathering of finance ministers and central bank chiefs in South Korea. [FRX/]
The G20 is striving to put the world economy on a more stable footing and defuse currency tensions that economists fear could trigger trade wars. [ID:nTOE69L00U]
“You’ve got the sense that the U.S. is basically out there saying we’re not going to do anything to devalue the dollar. Those sort of issues have been providing some support for the U.S. dollar,” said David Watt, senior currency strategist at RBC Capital Markets.
“The bulk of the work for the G20 and the G20 communique is not going to be finalized until the weekend so the markets are prepared for, well, just in case there’s an agreement, we don’t necessarily want to be caught short the dollar.”
But Watt added the market was cautious in general about what’s going to happen with currencies, given speculation the Federal Reserve will announce more monetary easing next month, likely through direct purchases of U.S. Treasury debt.
The Canadian dollar CAD=D4 ended at C$1.0269 to the U.S. dollar, or 97.38 U.S. cents, down a hair from Thursday’s close at C$1.0263 to the U.S. dollar, or 97.44 U.S. cents. It was down 1.5 percent for the week.
Earlier, the currency firmed to a session high of C$1.0224 to the U.S. dollar, or 97.81 U.S. cents, supported in part by data showing Canadian retail sales in August beat expectations. [ID:nN22252766] [ID:nN22149720]
“Retail sales were above expectations,” said Camilla Sutton, chief currency strategist at Scotia Capital.
“There was a revision higher as well to the July numbers. It’s a bit stale coming from the summer, but still it’s a positive print for Canada as our data has been a bit uneven lately, so this is a positive piece in terms of updating us on where the consumer sits.”
Economists said Friday’s September inflation data, which was largely muted, was unlikely to strengthen the resolve of those who think the Bank of Canada will begin to raise interest rates soon.
The central bank paused on rate increases earlier this week, and said that it would have to consider any further rate hikes carefully, given the patchy global recovery. [ID:nN20223890]
BONDS LITTLE CHANGED
Canadian bond prices were mostly flat as the market remained largely subdued ahead of November’s Federal Open Market Committee meeting, where the U.S. central bank could announce further monetary stimulus. [US/]
Reaction to the Canadian economic data and corporate issuance throughout the day caused some gyrations across the curve, but the prevailing theme remains the expectation the Fed will engage in quantitative easing, said Ian Pollick, portfolio strategist at TD Securities.
“We did take some price action from the U.S., we were overperforming, at the beginning part of the day. The data didn’t do too much to the curve,” he said.
“You really have a prevailing bias in the market and that’s about quantitative easing.”
The two-year bond CA2YT=RR was down 2 Canadian cents to yield 1.401 percent, while the 30-year bond CA30YT=RR was up 15 Canadian cents to yield 3.439 percent.
In new issuances, Royal Bank of Canada (RY.TO) sold C$1.5 billion of medium-term notes on Friday, according to a term sheet seen by Reuters. [CA-TNC] (Reporting by Jennifer Kwan; editing by Rob Wilson)