TORONTO: The Canadian dollar closed stronger against the greenback on Thursday but lower crude prices and market anticipation of a weak Canadian employment report for February on Friday cost it most of its early gains.
The price of oil, a major Canadian export, fell on forecasts for another big supply build, with US crude settling down 2.3 percent at $47.05 a barrel, and Brent finishing nearly 1 percent lower at $57.08.
"We saw crude sell off aggressively, after being up, so that puts pressure on Canada," said David Bradley, director of foreign exchange trading at Scotiabank.
"Heading into tomorrow's employment data as well, I think the markets are expecting that we might get a soft number. Anyone who's short USD/CAD is probably covering those positions as well."
The Canadian dollar closed at C$1.2703 against the US dollar, or 78.72 US cents, about half a cent stronger than Wednesday's finish at C$1.2761, or 78.36 US cents. It touched as high as C$1.2613, or 79.28 US cents, earlier in the session.
The US dollar index, which measures the greenback against six major currencies, touched its highest level in nearly 12 years overnight on anticipation the US Federal Reserve will hike interest rates sometime in the coming months, but it softened ahead of the unexpectedly weak retail sales data on Thursday and sold off further immediately after.
"(The US dollar has) gained a lot of momentum in the last couple of weeks. We've taken a little bit of a breather from that," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
The drop in US retail sales in February was fairly broad-based, suggesting poor winter weather kept shoppers away, and could hurt economic growth in the first quarter.
Domestically, there was a slew of lower-tier economic data.
Canada's household debt-to-income ratio rose to a record high in the final quarter of 2014, while prices for new homes fell for the first time in nearly five years in January. Figures for home resales in February showed a correction underway in several markets with prices scratching out just a slight gain nationally.
Canadian government bond prices were higher across the maturity curve, with the two-year up 1.5 Canadian cents to yield 0.574 percent and the benchmark 10-year rising 10 Canadian cents to yield 1.492 percent.
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