Article Highlights

  • Canadian dollar at C$1.2720, or 78.62 U.S. cents
  • Loonie touches its strongest since Nov. 13 at $1.2673
  • Canadian retail sales rise 0.1 percent in September
  • Bond prices higher across the a steeper yield curve
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The Canadian dollar weakened against its U.S. counterpart on Thursday, pulling back from an earlier 10-day high, after domestic data showed retail sales rose far less than expected in September.

The 0.1 percent increase was short of economists’ forecasts for a gain of 0.9 percent, while volumes fared worse, declining by 0.6 percent.

The data is negative for the Canadian dollar and positive for the front end of Canada’s yield curve, “which still has some work to do in pricing out a January hike,” Nick Exarhos, an economist at CIBC Capital Markets, wrote in a research note.

The Bank of Canada raised interest rates in July and September for the first time in seven years but has since turned more cautious about the outlook for the domestic economy.

Chances of another hike by the bank’s January meeting dipped to 31 percent from 34 percent before the data, the overnight index swaps market indicated.

Investors will be looking to a speech by Bank of Canada Governor Stephen Poloz in December for clues on prospects for more rate hikes.

At 9:22 a.m. EST (1422 GMT), the Canadian dollar was trading at C$1.2720 to the greenback, or 78.62 U.S. cents, down 0.2 percent.

The currency’s weakest level of the session was C$1.2730, while it touched its strongest since Nov. 13 at $1.2673.

The currency weakened despite higher prices for oil, one of the countries main exports.

U.S. crude prices were up 0.26 percent at $58.17 a barrel.

Still, strong inflows of foreign money into Canadian stocks and bonds this year are adding to investor confidence that the rally since May in the country’s currency is sustainable because it is not just supported by speculative flows.

Canadian government bond prices were higher across a steeper yield curve, with the two-year up 3.5 Canadian cents to yield 1.437 percent and the 10-year rising 3 Canadian cents to yield 1.902 percent.

U.S. markets were closed for the Thanksgiving holiday.