TORONTO: The Canadian dollar fell against its broadly stronger US counterpart on Friday as preliminary domestic data showed retail sales falling in May, but the move was limited after speculators built up large short positions in the currency.

The loonie was trading 0.2% lower at 1.3710 per US dollar, or 72.94 US cents, after earlier touching its strongest level since June 7 at 1.3675.

For the week, the currency was up 0.2%, posting its second straight week of modest gains.

“I think one reason for the CAD’s gains this week can be found in market positioning,” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

“Traders and investors have been persistently bearish on the CAD in recent months but extreme CAD short positioning has often coincided with a rebound of sorts in the CAD as tired or weaker shorts cover in the absence of any additional CAD losses.”

Speculators have raised their bearish bets on the currency to a record high level, recent data from the US Commodity Futures Trading Commission showed..

Canadian retail sales rose 0.7% in April, matching expectations, as sales at gasoline pumps boosted the overall numbers. A flash estimate showed a drop of 0.6% in May.

“The overall trend in spending points to softness, with the three-month average growth rate barely moving into positive territory in April, then reverting back in May,” Maria Solovieva, an economist at TD Economics, said in a note.