TORONTO: The Canadian dollar strengthened to a three-week high against its US counterpart on Tuesday after robust domestic retail sales data for June bolstered expectations the Bank of Canada could raise interest rates in October.
Retail sales, which hit a record C$48.99 billion ($38.88 billion), were up in six of the 11 sectors and grew by 1.1 percent when weak auto sales and lower gasoline prices were excluded.
The currency touched C$1.2526 to the US dollar, or 79.83 US cents, after the data was released, its strongest level since August 1.
At 9:19 a.m. ET (1319 GMT), the Canadian dollar was trading at C$1.2543, or 79.73 US cents, up 0.1 percent.
Its weakest level of the session was C$1.2595, hit during overnight trading.
"Positioning makes it challenging for the CAD rally to persist but lack of support on the USD side, coupled with some improvement in tier one data, suggest a possible test of the lows near C$1.2414," TD Securities' Fred Demers and Mark McCormick wrote in a research note following the data.
The US dollar rebounded broadly against major currencies ahead of the annual central banking conference in Jackson Hole, Wyoming, later this week, with investors hoping to glean more insight into the monetary policy outlook.
Canadian government bond prices fell across the maturity curve, with the two-year price down 4 Canadian cents to yield 1.271 percent and the benchmark 10-year falling 32 Canadian cents to yield 1.919 percent.
The Canada-US two-year bond spread was -4.3 basis points, while the 10-year spread was -27.7 basis points.
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