The Canadian dollar strengthened slightly against its US counterpart on Thursday, regaining some ground after Wednesday's drop, as firmer oil prices and a dovish European Central Bank supported risk appetite. Stocks rose in the United States and Europe and the dollar hit a three-week high against the euro after ECB President Mario Draghi said further rate cuts were considered to stimulate the euro zone economy.
"The day's move was some give back from the previous session's hefty decline and was supported by a stabilisation in oil prices and better-than-expected Canadian retail sales," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets. Retail sales rose more than expected in August, climbing for the fourth month in a row as sales at motor vehicle and parts dealers increased, data from Statistics Canada showed on Thursday. Retail sales rose by 0.5 percent, topping economists' expectations for a gain of 0.1 percent.
The Canadian dollar ended the North American session at C$1.3107 to the greenback, or 76.30 US cents, stronger than Wednesday's close of C$1.3137, or 76.12 US cents. The Canadian dollar had weakened more than 1 percent - to its lowest since October 5 - on Wednesday after the Bank of Canada lowered its growth forecasts for 2016 and 2017, underscoring expectations the central bank is a long way off from raising interest rates. "We had a bit of a risk-on appetite that's been occurring and a lot that has helped equities and, at the margins, that tends to help the commodities currencies," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada. Canadian government bond prices rose across the maturity curve, with the two-year up 2 Canadian cents to yield 0.525 percent and the benchmark 10-year up 12 Canadian cents to yield 1.447 percent.