TORONTO: Canada's currency perked up against the US dollar on Thursday after two days of losses, lifted by stronger-than-expected domestic retail sales and some optimism that US politicians would keep working to break the federal budget logjam.
Canadian retail sales in October jumped by a much higher-than-forecast 0.7 percent from September to hit a record, but some analysts said the figures would not do much to boost recent sluggish economic growth.
"The very strong retail sales this morning in Canada has probably been supporting the Canadian dollar, but I don't think it's something that's sustainable," said Charles St-Arnaud, Canadian economist and currency strategist in New York.
"The Canadian dollar is stronger than what it should be given where commodity prices are," he said.
St-Arnaud also noted that the differential between the price at which Canadian producers are selling their oil and the price at which Canadian refiners have to import oil is close to a record high around $50 a barrel.
Investors clung to hope for a US budget agreement after Republican House Speaker John Boehner pledged to keep working on a solution to the "fiscal cliff", while he continued to criticize President Barack Obama's approach to budget talks.
The Canadian dollar ended the North American session at C$0.9873 versus the US dollar, or $1.0129, stronger than Wednesday's finish at C$0.9881, or $1.0120.
"As we get closer to this 'fiscal cliff,' the market is even more singularly focused on that issue," said Greg Moore, FX strategist at TD Securities, referring to the US talks to avert steep tax hikes and spending cuts that threaten recession and that are due to take effect automatically in January.
Boehner's "Plan B" to limit income-tax increases to the wealthiest sliver of the population appeared likely to pass the House on Thursday evening after it narrowly cleared a procedural hurdle in the afternoon. On Wednesday, Obama threatened to veto the Republican measure.
Moore noted near-term US dollar resistance versus Canada around C$0.9900 and support around C$0.9825-30.
The market barely reacted to a round of strong US data, including on gross domestic product growth and housing.
Canadian government bond prices were little changed across the curve. The two-year bond was up 2 Canadian cents, yielding 1.133 percent, while the benchmark 10-year bond lost 4 Canadian cents to yield 1.849 percent.
Center>Copyright Reuters, 2012
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