Canada Dollar Falls as Retail Sales Rise Trails Forecasts
Canada’s dollar declined against its U.S. counterpart as retail sales trailed economists’ projections, eroding the currency’s appeal.
The loonie, so-called for the image of the aquatic bird on the dollar coin, declined against the majority of its most- traded peers. It advanced earlier after Chinese factory output rose for the first time in 13 months, adding to signs growth in that economy is rebounding.
Retail sales increased 0.1 percent to C$39.1 billion ($39.3 billion), the third consecutive monthly gain, as increases at new car dealers were offset by declines at department stores and gasoline stations, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News forecast a 0.5 percent increase, based on the median of 22 projections. U.S. markets are closed today for the Thanksgiving holiday.
“The retail data is a huge disappointment,” Mazen Issa, Canada macro strategist at Toronto-Dominion Bank (TD)’s TD Securities, said in a phone interview. “Being range-bound is the theme for the Canadian dollar today, especially with U.S. markets closed and quiet markets here.”
The Canadian dollar declined 0.1 percent against the greenback to 99.74 cents per U.S. dollar at 5 p.m. in Toronto. One Canadian dollar buys $1.0026.
The loonie has climbed 1 percent this year against nine developed-nation counterparts tracked by Bloomberg Correlation- Weighted Indexes. The U.S. dollar has dropped 1.7 percent, and the yen leads decliners with a drop of 9 percent.
The Standard & Poor’s GSCI Index of 24 raw materials advanced 0.5 percent on the manufacturing data from China, among the largest importers of metals. Canada derives about half its export revenue from commodities.
Crude oil for January delivery slipped 0.3 percent. Crude is Canada’s largest export.
The preliminary reading in China was 50.4 for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics. It compares with a final level of 49.5 for October. A reading above 50 indicates expansion.
Canada’s economic growth rate may remain less than 2 percent through the rest of this year, according to the median estimate of economists surveyed by Bloomberg. Consumers are reacting to slow employment growth and tighter rules on mortgage borrowing that Finance Minister Jim Flaherty imposed in July to ease the risk of a housing bubble.
“The data is a sign of weak growth,” Issa said. “It has implications for the monthly gross domestic product, extending into quarterly implications for GDP, and there’s a significant chance that the Bank of Canada will not reach its growth target.”
Canadian bonds were little changed, with the yield on the government 10-year bond at 1.77 percent, one basis point higher. The 2.75 security due in June 2022 slipped 4 cents to C$108.60.
Canadian investors are fleeing Canadian government yields at almost record lows by redeploying cash into the corporate credit market. About C$14 billion in coupons and principal will be paid on Dec. 1, according to Royal Bank of Canada estimates.
A total of C$60 billion of such payments will flow to investors during the month, in line with past December figures, said Ian Pollick, a fixed-income strategist at Royal Bank’s RBC.
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