CANADA FX DEBT-C$ retreats after unexpected fall in Canadian retail sales
TORONTO, June 19 (Reuters) – The Canadian dollar weakened against the greenback on Friday, hurt by data that showed an unexpected fall in retail sales in April and general market skittishness over Greece.
The price of crude, a major Canadian export, fell 2 percent on Friday, adding further pressure on the loonie.
Overseas, anxiety that Greece could default soon sent the euro lower against key currencies, and fueled safe-haven buying of the U.S. dollar.
“How long can they keep kicking the can down the road before they’re actually faced with insolvency? We’ve seen a flight to safety to some extent,” said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary.
“Oil prices – they’ve been down on the day, so that’s also putting a little pressure on the Canadian dollar.” The Canadian dollar finished at C$1.2266 to the greenback, or 81.53 U.S. cents, weaker than the Bank of Canada’s official close on Thursday of C$1.2227, or 81.79 U.S. cents. At one point the currency retreated to C$1.2296, 81.33 U.S. cents.
The loonie has gained about 0.4 percent for the week, however.
The loonie was already under some pressure before the retail sales figures were released this morning. After two months of gains, sales fell 0.1 percent in April as consumers spent less at food and electronic stores. Economists had forecast a 0.7 percent rise from March. Sales in March were revised higher to a 0.9 percent rise from a 0.7 percent increase. The disappointing figures overshadowed a report that showed a slight uptick in Canada’s annual inflation rate for May, which came in at 0.9 percent, but still far below the Bank of Canada’s target range of 1 percent to 3 percent. Forecasters had expected the rate to stay at 0.8 percent.
“When you take that in conjunction with some of the other data that we’ve seen this month in terms of manufacturing sales, goods trade data, the growth outlook for April doesn’t look too supportive,” said Bipan Rai, director of foreign exchange strategy at CIBC World Markets.
Canadian government bond prices were higher across the maturity curve, with the two-year up 5.5 Canadian cents to yield 0.595 percent, and the benchmark 10-year rising 72 Canadian cents to yield 1.717 percent.
The Canada-U.S. two-year bond spread was -2.6 basis points, while the 10-year spread was -54.3 basis points.
By Solarina Ho
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