The Canadian dollar CADUSD strengthened against its U.S. counterpart on Thursday as oil prices rose and weaker-than-expected U.S. retail sales data encouraged profit-taking by investors that had made bullish bets on the greenback.
The loonie was trading 0.5% higher at 1.3480 to the greenback, or 74.18 U.S. cents.
It was the second straight day of gains for the currency. On Tuesday, it hit its weakest intraday level in two months at 1.3586 as investors reassessed prospects of Federal Reserve interest rate cuts over the coming months.
“People were worried about inflation being too high and that’s going to keep rates higher,” said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc. “Weaker numbers like these retail sales does help the narrative for the Fed being able to cut rates in the future.”
U.S. retail sales fell by the most in 10 months in January, suggesting slowing momentum in consumer spending.
“We also saw a lot of profit-taking ... We saw a lot of sellers come in and take advantage of that high in USD,” Richardson said.
The U.S. dollar gave back some recent gains against a basket of major currencies, while the price of oil, one of Canada’s major exports, climbed 1.7% to $77.97 a barrel.
Domestic data showed housing starts falling 10% in January from the previous month and factory sales down 0.7% in December. Still, much of the decline in factory sales was due to prices. Volumes fell much less, by 0.1%.
Canadian government bond yields edged lower across a flatter curve, tracking moves in U.S. Treasuries. The 10-year was down 1.7 basis points at 3.541%, extending its pullback from a two-and-a-half-month high on Tuesday at 3.695%.