TORONTO: The Canadian dollar strengthened against its US counterpart on Friday, clawing back much of this week’s decline, as an increase in investor risk appetite offset domestic data showing a surprise decline in retail sales.

The loonie was trading 0.3% higher at 1.3440 to the greenback, or 74.40 US cents, after trading in a range of 1.3437 to 1.3502.

The move higher for the Canadian currency came as the US dollar gave back some of its recent rally against a basket of major currencies and the S&P 500 notched an intraday record high for the first time in two years.

Canada is a major producer of commodities, such as oil, so the loonie tends to be sensitive to shifts in risk appetite.

“You definitely have some risk-on tailwinds,” said Michael Goshko, senior market analyst at Convera Canada ULC. “US dollar strength has just faded throughout the day.” The Canadian dollar has recovered some ground after it hit on Wednesday a five-week low at 1.3541.