After advancing for three days, the Canadian dollar lost ground against the US currency on Friday as tame inflation data set the tone, while a broadly stronger greenback offered little chance for the currency to rise. Canadian bonds finished lower as traders focused more on an unexpected rise in Canadian retail sales in March than on the consumer price index. Retail sales were up 0.2 percent versus forecasts for a 0.3 percent fall. The currency finished at C$1.2661to the US dollar or 78.98 US cents, down modestly from C$1.2598 to the US dollar, or 79.38 US cents, at Thursday's close. The Canadian dollar slipped as the Bank of Canada's closely watched core inflation index, which strips out energy and some food prices, rose by 1.7 percent in April.
Analysts had predicted 1.9 percent. The overall inflation rate in April rose to 2.4 percent from 2.3 percent in March, mostly because of higher gasoline prices, Statistics Canada said. "We got weaker-than-expected (inflation) data to open the day and that basically set the tone for the day in terms of how dollar-Canada was looking to trade," said George Davis, chief technical strategist at RBC Capital Markets.
"And even though we got stronger-than-expected retail sales numbers, that was basically ignored at the expense of the broader US dollar strength that we saw." The inflation figures also firmed expectations that the central bank will likely keep its key overnight rate at 2.5 percent at its policy setting next on Wednesday.
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