Loonie recovers from 2-week low as Fed calms funding market

• The data suggested that Canada's economy has not been able to escape headwinds to global trade.
• Still, the central bank expects economic growth to slow after a rapid pace of activity in the second quarter.

TORONTO: The Canadian dollar was little changed against its US counterpart on Tuesday, with the currency recovering from a near two-week low hit after weaker-than-expected domestic factory data as the greenback broadly declined.

Canadian factory sales slid by 1.3pc in July from June, far exceeding the 0.3 percent decrease expected by analysts, as plant maintenance shutdowns weighed on sales in the primary metal and motor vehicle industries, Statistics Canada said.

The data suggested that Canada's economy has not been able to escape headwinds to global trade, said Scott Lampard, head of global markets at HSBC Bank Canada.

"The Canadian economy is exhibiting a little bit of fatigue because it is swimming upstream," Lampard said.

The Bank of Canada has shown no appetite for cutting interest rates even as some of its global peers have eased.

Still, the central bank expects economic growth to slow after a rapid pace of activity in the second quarter.

"If you begin to see a bit of an accumulation of data points that confirm that the Canadian economy seems to be slowing... that's where you get the bank doing something that might be a little bit more aggressive than people had thought," Lampard said.

Canada's inflation report for August is due on Wednesday and could help guide expectations for the central bank's interest rate outlook.

At 4:50 p.m. (2050 GMT), the Canadian dollar was trading little changed at 1.3243 to the greenback, or 75.51 US cents.

The currency touched its weakest intraday level since Sept. 4 at 1.3300.

The US dollar fell against a basket of major currencies after the New York Federal Reserve said it would conduct a repurchase operation in a bid to lower funding costs, which had earlier climbed as much as 10pc.

The US central bank is expected to cut interest rates on Wednesday.

The price of oil, one of Canada's major exports, declined after Saudi Arabia's energy minister said the kingdom would fully restore by the end of the month its oil production, hit by an attack this weekend that shut 5pc of global oil output.

US crude oil futures settled 5.7pc lower at $59.34 a barrel.

Canadian government bond prices were higher across a flatter yield curve in sympathy with US Treasuries.

The 10-year rose 28 Canadian cents to yield 1.451pc.