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Canada Dollar Rises From Lowest Since 2009 on Retail, Inflation

The Canadian dollar rose from a four and a half year low after reports showed inflation and retail sales grew faster than forecast, damping bets the Bank of Canada will cut interest rates to bolster the economy.

The currency rose against all its major peers following losses triggered when Bank of Canada Governor Stephen Poloz said March 18 he wouldn’t rule out rate cuts if the economy worsens and predicted slower growth in the first few months of the year. Canada’s dollar has been the worst performing major currency this year against its U.S. peer since the central bank said in January the risks of falling inflation had increased, prompting bets it would cut borrowing costs.

“It’s going to moderate some of the view that there’s a cut in the Bank of Canada going forward,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada, by phone from Toronto. “The Bank of Canada is unlikely to cut rates, but definitely unlikely to raise rates.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to C$1.1221 per U.S dollar as of 5 p.m. in Toronto. Yesterday, it touched C$1.1279 per U.S. dollar, the lowest since July 2009. One loonie buys 89.11 U.S. cents.

Futures traders increased their bets that the Canadian dollar will decline against the U.S. dollar, the latest figures from the Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 69,805 on March 18, compared with net shorts of 52,191 a week earlier.

Inflation Watch

Canada’s inflation rate slowed to 1.1 percent in February from a year ago, compared with the 1 percent rate forecast in the median estimate of a Bloomberg economist survey, Statistics Canada said from Ottawa. In January, the consumer price index rose 1.5 percent.

Retail sales rose 1.3 percent in January, the fastest pace in eight months, compared with the 0.7 percent forecast increase in a Bloomberg survey.

The data ease speculation Canada’s central bank will lag the U.S. in raising interest rates after Federal Reserve Chair Janet Yellen said March 19 she could raise the benchmark rate about six months after monetary stimulus is expected to wind down at the end of the year.

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