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Canada’s Dollar Climbs as Retail Sales Rise More Than Forecast

Canada’s dollar advanced against the majority of its most-traded counterparts after a report showed retail sales grew in September at the fastest pace in a year, improving the outlook for economic growth.

Canada’s currency rose from almost the lowest level in more than six weeks versus the U.S. dollar, rallying after the International Monetary Fund revamped its credit-line program to help countries facing outside shocks.

The IMF news was “supportive,” said Shane Enright, executive director at Canadian Imperial Bank of Commerce’s CIBC World Markets, by phone from Toronto. “This new flexible credit line they brought in, that seemed to take away a little bit of the pain trade.”

Canada’s currency, known as the loonie, appreciated 0.2 percent to $1.0383 per U.S. dollar at 5 p.m. in Toronto. It increased 0.3 percent to 74.13 yen. One Canadian dollar buys 96.31 U.S. cents.

Canadian government bonds rose, with the 10-year note yield falling two basis points, or 0.02 percentage point, to 2.08 percent. The price of the 3.25 percent security due in June 2021 increased 20 cents to C$110.08. Canada’s 10-year bonds yield 15 basis points more than equivalent-maturity U.S. Treasuries.

Bond Sale

Canada will auction C$3.5 billion ($3.4 billion) of bonds maturing in March 2017 tomorrow, the Bank of Canada said on its website. The government’s last auction of five-year bonds, on Oct. 12, drew an average yield of 1.729 percent and a bid-to-cover ratio of 2.32. The five-auction average is 2.41, according to Bank of Canada data.

Retail sales grew 1 percent to a seasonally adjusted C$38.2 billion ($36.9 billion), the fastest pace since November 2010 and twice as fast as economists forecast, Statistics Canada said today in Ottawa. The gain exceeded all Bloomberg News survey estimates of 19 economists that had a median growth forecast of 0.5 percent.

“The data is positive,” said Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities Inc. unit in Stamford, Connecticut, in an e-mail message.

The loonie touched C$1.0419 yesterday, matching the Oct. 7 level. That “could be a near-term” top in the U.S. dollar versus the Canadian dollar, Kim said, “provided we don’t get another large risk-off move.”

Technical Levels

Investors “retain a bias to buy the U.S. dollar versus the Canadian dollar on dips,” George Davis, managing director and chief technical analyst at Royal Bank of Canada’s RBC Capital Markets unit in Toronto, wrote in a note to clients today. A “clean daily close” above C$1.0365 would open C$1.0476 as the next resistance level, Davis wrote. Resistance refers to the upper boundary of a trading range where sell orders may be clustered.

The Washington-based IMF said its new instrument, the Precautionary and Liquidity Line, can be tapped with few conditions attached by countries with strong economies currently facing short-term liquidity needs.

“This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness,” IMF Managing Director Christine Lagarde said in an e-mailed statement.

Futures on crude oil, Canada’s biggest export, increased 0.7 percent to $97.75 a barrel. The Standard & Poor’s/TSX Composite Index rose 0.1 percent after gaining as much as 0.5 percent earlier. The S&P 500 Index dropped 0.4 percent after increasing 0.3 percent earlier. It closed below 1,200 for a second day.

Above 1,200

“Psychologically, we need to get back above 1,200 in the S&P and hang in there for a bit rather than succumb to gloom about next year’s economic outlook for particularly the Canadian dollar to benefit between now and Christmas,” Kit Juckes, head of foreign-exchange strategy at Societe Generale SA in London, said in a telephone interview.

Canada’s currency is down 3.6 percent this month versus its U.S. counterpart. Its commodity-exporting peers of Australia and New Zealand have lost 6.6 percent and 7.3 percent in November for the worst performances against the greenback among the 16 most-traded currencies.

“The commodity currencies have all been under pressure,” said CIBC’s Enright. “The market’s a little calmer today. You’ve got gold up a little bit. Oil has sort of stabilized. It was a pretty hard selloff in the Canadian dollar yesterday.”

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