Canadian Dollar Drops From Six-Week High as Retail Sales Unexpectedly Fall
Canada’s dollar fell from a six- week high against its U.S. counterpart after a government report showed retail sales unexpectedly fell in July, calling into question the strength of the economic recovery.
The currency gained earlier today as much as 0.8 percent as the greenback slid against most of its major counterparts after the U.S. Federal Open Market Committee said yesterday in its statement it “will provide additional accommodation if needed” to spur growth. The loonie extended its drop as stocks slid, reducing demand for assets related to economic growth.
“The Canadian data seems to disappoint now on every release,” Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit, said via e-mail. “The Canadian dollar should easily give back all of the gains post-FOMC and more.”
The Canadian currency depreciated 0.3 percent to C$1.0302 per U.S. dollar at 4:30 p.m. in Toronto, from C$1.0268 yesterday. It touched C$1.0192, the strongest level since Aug. 6. One Canadian dollar buys 97.07 U.S. cents.
Retail sales unexpectedly decreased 0.1 percent to C$35.9 billion ($35.1 billion) in July as consumers cut purchases of furniture, appliances and electronics, Statistics Canada reported. The median forecast of 15 economists in a Bloomberg News survey was for a 0.6 percent gain. Statistics Canada reported yesterday that consumer prices unexpectedly fell 0.1 percent in August.
The loonie was the worst performer today among the greenback’s major counterparts. Home prices in the U.S., Canada’s largest trading partner, dropped 3.3 percent in July from a year earlier.
Canadian Bonds
Government bond yields dropped for a second day, tracking U.S. rates. The 10-year bond yield fell 7 basis points, or 0.07 percentage point, to 2.84 percent. It touched 2.83 percent, the lowest level in two weeks. The price of the 3.5 percent security maturing in June 2020 increased 58 cents to C$105.57.
The yield advantage of Canada’s 10-year bonds over equivalent-maturity U.S. Treasuries widened yesterday by 9 basis points, the most since Aug. 13, 2009, after the Fed’s statement. The gap narrowed to 32 basis points today from 34 yesterday.
Stocks fluctuated, with the Standard & Poor’s 500 Index down 0.5 percent. The S&P/TSX Composite Index dropped 0.2 percent and the MSCI World Index, a gauge of equities in 24 developed nations, was little changed.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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