The Canadian dollar reached its highest level in nearly three decades versus the US currency on Friday as a strong reading on domestic retail sales data further stoked expectations of a future interest rate hike. Domestic bond prices, still reeling from a robust inflation report earlier in the week, added to the losses given the heightened rate-hike expectations.
At 9:20 am (1320 GMT), the Canadian unit was at C$1.0925 to the US dollar, or 91.53 US cents, up from C$1.0987 to the US dollar, or 91.02 US cents, at Thursday's close.
The Canadian dollar has been storming higher for much of the year and, after a near 7-percent gain in the past two months, was sitting just shy of hitting its multi-decade high. It's latest move came immediately after data showed retail sales in Canada surged by 1.9 percent in March, which was well ahead of expectations for a gain of 0.8 percent. That data boosted the Canadian dollar as high as C$1.0910, or 91.65 US cents, before it gave back a slice of the gains.
"This is just what the market needed to push through that level," said Matthew Strauss, senior currency strategist at RBC Capital Markets. "It was very strong data. Not only was the headline number above expectations, but also if we look at the details it was a very strong reading."
The currency neared the multi-decade high during the overnight session but fell just short as China's central bank decided to widen the yuan's daily trading band against the greenback, sparking a drop in most major currencies. The bank, which has held its overnight rate at 4.25 percent since last May, will announce its next decision on May 29.
The two-year bond fell 11 Canadian cents to C$98.74 to yield 4.384 percent, while the 10-year bond dropped 15 Canadian cents to C$97.60 to yield 4.325 percent. The yield spread between the two-year and 10-year bond moved to -7.3 basis points from -3.2 at the previous close. The 30-year bond dropped 25 Canadian cents to C$122.70 to yield 4.293 percent.
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