TORONTO: The Canadian dollar strengthened on Thursday to its firmest level in five weeks against its US counterpart, helped in part by US data that lifted sentiment about the outlook for Canada's largest export market.
A gauge of planned US business spending on capital goods rose in June, buoying hopes of an acceleration in economic growth in the second half of 2013.
The number of Americans filing new claims for jobless benefits rose slightly last week but remained within a range that suggests the US labor market continues to improve at a moderate pace. A four-week average of new claims, which smoothes out volatility, fell by 1,250 from a week earlier.
"The market's buying into the 'good US recovery is good for Canada' story," said Don Mikolich, executive director, foreign exchange sales, CIBC world markets. "Retail sales still has a bit of an afterglow from Tuesday as people have maybe marked up their forecast a bit there."
Higher auto sales helped drive Canadian retail sales 1.9 percent higher in May from April, the biggest monthly jump in more than three years and far greater than the 0.4 percent growth predicted by market operators.
A number of economists speculate that the data could signal higher-than-expected economic growth data for the second quarter. Canada's economy grew at a 2.5 percent annual rate in the first quarter.
The Canadian dollar, which was mixed against other major currencies, finished the North American session at C$1.0264 versus the greenback, or 97.43 US cents. This was firmer than Wednesday's finish at C$1.0316, or 96.94 US cents. At one point, it touched C$1.0255, its strongest level since June 19.
The currency was trading at its weakest level against the New Zealand dollar in about seven weeks.
Investors are also turning their focus to next week's data. US economic growth data and payroll processor ADP's private-sector jobs report will be the early indicators for the health of the US labor market. US employment figures for July are due at the end of next week.
"The big dollar generally is driving everything in our markets at the moment and that's driven by expectations of the Fed, and Fed policy's driven basically by the labor market," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.
The price of Canadian government debt was mixed. The two-year bond fell half a Canadian cent to yield 1.151 percent, while the benchmark 10-year bond rose 13 Canadian cents to yield 2.463 percent.
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