C$ pares weekly decline as investors cheer vaccine progress

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, January 23, 2015. REUTERS/Mark Blinch (CANADA - Tags: BUSINESS)

TORONTO (Reuters) - The Canadian dollar gained ground against its broadly weaker U.S. counterpart on Friday as signs of progress on developing a COVID-19 vaccine boosted investor sentiment, with the loonie clawing back some of this week’s decline.

The Canadian dollar CAD= was trading 0.3% higher at 1.3180 to the greenback, or 75.87 U.S. cents, having traded in a range of 1.3177 to 1.3237. For the week, the loonie was down 0.5%.

“The usual suspects” were behind the currency’s move higher on Friday, including a weaker U.S. dollar and increased risk appetite, said Ronald Simpson, managing director, global currency analysis at Action Economics.

Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.

Wall Street bounced back after three straight days of losses as a positive update from Pfizer on development of its COVID-19 vaccine tempered worries that a resurgent pandemic would derail economic recovery. Data showing stronger-than-expected U.S. retail sales growth last month added to positive sentiment.

Canadian manufacturing sales fell by 2.0% in August, following three months of consecutive gains, Statistics Canada said. Excluding transportation equipment, sales rose 1.1%.

U.S. crude oil futures CLc1 settled 0.2% lower at $40.88 a barrel on concern that a spike in COVID-19 cases in Europe and the United States would curtail demand in two of the world's biggest fuel consuming regions.

Preserving Canada’s triple-A credit rating could be less of a priority for Ottawa than in years gone by, with the focus on digging the economy out of a hole rather than staying in a shrinking group of top-rated sovereign borrowers, analysts say.

Canadian government bond yields were mixed across the curve, with the 10-year CA10YT=RR unchanged at 0.572%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Sandra Maler