TORONTO: The Canadian dollar was weaker against the US dollar on Wednesday, as better-than-expected US retail sales bolstered the greenback, while a dearth of domestic data limited moves for Canada's currency.
Retail sales out of Canada's largest trading partner rose more than expected in February as Americans bought motor vehicles and a range of other goods, even as they paid more for gasoline, suggesting consumer spending this quarter will hold up, despite higher taxes.
The data is the latest evidence that the US economic recovery is gaining traction.
The Canadian dollar strengthened initially after the robust data bolstered prospects for the world's largest economy, but trimmed gains for the remainder of the session as the US dollar rose to seven-month highs.
"Over the past two years, usually when you had good US data, you would have had an appreciation of the Canadian dollar," said Charles St-Arnaud, economist and currency strategist at Nomura Securities in New York.
"Now, the correlation has been changing ... Investors are gradually turning a bit more optimistic about the US economy, especially given the signs coming from the housing market."
The Canadian dollar was trading at C$1.0273 to the greenback, or 97.34 US cents, compared with C$1.0261, or 97.46 US cents, at Tuesday's North American close.
"We're finally back in what you would consider a normal mode, where stronger data in the US is typically positive for the US dollar. But we haven't lost that much ground against the US," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
The Canadian dollar was stronger against the euro and Swiss franc. It softened against sterling after Canada on Tuesday touched its strongest level against the British pound since June 2010 on dismal UK manufacturing data.
There is little that is expected to move markets on the economic data front for Canada this week, although Chandler said the currency could move if Friday's report on existing home sales is particularly weak.
The price of Canadian government debt was weaker across the curve, with the two-year bond off 3 Canadian cents to yield 0.979 percent, while the benchmark 10-year bond eased 9 Canadian cents to yield 1.920 percent.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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