Canadian Dollar at 3-Month High as U.S. Retail Sales, Oil Rise

Canada’s dollar traded at an almost three-month high after crude oil gained and a report showed U.S. retail sales rose, boosting optimism demand for exports to the nation’s largest trading partner will increase.

The currency, often referred to as the loonie because of the waterfowl on the one-dollar coin, has rallied for five consecutive weeks on speculation global growth will sustain demand for natural resources such as oil, the nation’s biggest export. It has traded stronger than parity versus its U.S. counterpart for six straight trading days.

“You’ve seen oil come off its lows, that’s obviously providing a bit of Canadian dollar strength,” Andrew Dilz, a currency trader at Tempus Consulting Inc., said in a telephone interview from Washington. “Retail sales helped as well.”

Canada’s currency appreciated 0.1 percent to 99.23 cents per U.S. dollar at 5 p.m. in Toronto. One Canadian dollar buys $1.0076. It reached 99.07 cents, close to the three-month high of 99.05 cents reached yesterday.

The loonie may test 98 cents even with investors showing “indecision” about pushing the currency higher when it trades around 99 cents, according to Toronto-Dominion Bank, which cited technical analysis. Charts don’t indicate a clear sign of the trend reversing, Shaun Osborne and Greg Moore, currency strategists at TD Securities in Toronto, wrote in a note to clients today.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Five-Year Sale

Canadian government bonds declined, pushing yields on the benchmark 10-year note up six basis points, or 0.06 percentage point, to 1.86 percent, the highest since May 29. The price of the 2.75 percent securities due in June 2022 declined 53 cents to C$107.97.

Canada’s government will auction C$3.4 billion ($3.43 billion) in five-year notes tomorrow. The securities carry a 1.5 percent coupon and mature in September 2017.

The 0.8 percent advance in U.S. retail sales followed a 0.7 percent decrease in June that was weaker than first reported, Commerce Department figures showed. Economists projected a 0.3 percent rise in July, according to the median forecast in a Bloomberg survey.

The Canadian dollar is “guilty by association to what’s perceived as some OK numbers out of the States,” Dean Popplewell, head analyst in Toronto at the online currency-trading firm Oanda Corp., said in a telephone interview.

Consumer Spending

Today’s report showed the retail sales category used to calculate gross domestic product, which excludes sales at auto dealers, building material stores and service stations, increased 0.9 percent after a 0.2 percent decrease in June. Last quarter, U.S. household spending grew at the slowest pace in a year.

Consumer purchases, about 70 percent of the economy, expanded at a 1.5 percent annual rate from April to June, according to Commerce Department data. Popplewell said the downward revision in June “doesn’t necessarily paint a rosy picture for third-quarter GDP.”

“I do not think that once the market really reads into these numbers, it can become overly bullish with respect to risk,” Popplewell said. “I think we will start seeing further opportunities to sell the loonie again.”

The euro rose against most its major counterparts as German growth slowed less than economists forecast and France unexpectedly avoided a contraction. European Economic and Monetary affairs Commissioner Olli Rehn said the euro zone’s foundations have to be rebuilt.

Market Focus

Weak data from the euro-area may weigh on risk sentiment, hurting the Canadian dollar, Firas Askari, head currency trader in Toronto at Bank of Montreal, said in a telephone interview. Askari said he expects flat growth at best in Europe for the next year to two years.

“There’s still a fair bit of uncertainty, the market might refocus on the negative as opposed to the positive,” he said.

Oil for September delivery advanced 0.8 percent to $93.43 a barrel on the New York Mercantile Exchange. Prices are up 20 percent from this year’s intraday low.

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