TORONTO (Reuters) - The Canadian dollar eked out a tiny gain against the U.S. dollar on Tuesday, but fears of a spillover from the U.S. economic slowdown kept it from gaining more traction after domestic retail sales data came in above market expectations.
Domestic bond prices rallied along with the larger U.S. market after U.S. data painted a picture of a struggling economy that has yet to hit bottom.
The Canadian currency closed at C$1.0173 to the U.S. dollar, or 98.30 U.S. cents, up from C$1.0179 to the U.S. dollar, or 98.24 U.S. cents, at Monday’s close.
The currency was given a boost early in the session as Statistics Canada said retail sales rose 1.5 percent in January, beating estimates for a 1.2 percent gain.
But, close on the heels of those numbers, a U.S. report on house prices came in below market expectations. That was followed by another U.S. report showing consumer confidence remained unchanged, but was having its worst run in 14 years.
“Certainly, the worst is not over in the U.S. for sure and I think there still are some worries about the effect that’s going to have on Canada,” said Steve Butler, director of foreign exchange trading at Scotia Capital.
On the technical side, the currency has been unable to push through its 200-day moving average of C$1.0226 to the U.S. dollar, which may signal more rangebound trading in the days and weeks to come, said Butler.
“People were more interested in buying euros than Canadian dollars today... If we are back in the range, I think Canada is going to get shoved aside by a lot of the players and speculators, and we’ve just become a slave to the flows.”
Canadian bond prices rose along with the larger U.S. market as investors focused on the deteriorating economic situation in the United States.
“The really soft U.S. data really seems to be dominating the bond market on both sides of the border,” said Eric Lascelles, chief economics and rates strategist at TD Securities.
Canada’s economic calendar is bare until Monday’s release of January gross domestic product figures. The key piece of domestic data next week is the March jobs report on April 4.
The two-year bond was up 4 Canadian cents at C$102.52 to yield 2.705 percent. The 10-year bond increased 35 Canadian cents to C$104.05 to yield 3.480 percent.
The yield spread between the two- and 10-year bonds was 77.5 basis points, down from 79.1 points at the previous close.
The 30-year bond was up 55 Canadian cents at C$118.15 to yield 3.947 percent. In the United States, the 30-year treasury yielded 4.309 percent.
The three-month when-issued T-bill yielded 1.93 percent, up from 1.68 percent at the previous close.
Editing by Rob Wilson