The Canadian dollar CADUSD strengthened to a six-week high against its U.S. counterpart on Friday as domestic data showed a surprise increase in retail sales, countering recent evidence of a slowdown in the economy.
The loonie was trading 0.6 per cent higher at 1.3610 to the greenback, or 73.48 U.S. cents, after touching its strongest level since Oct. 12 at 1.3595.
Among G10 currencies, only the Norwegian crown kept pace with the Canadian currency’s move. For the week, the loonie was up 0.8 per cent.
Canadian retail sales grew by 0.6 per cent in September from August, beating estimates for sales to stay flat, and were seen likely to gain 0.8 per cent in October, data showed.
“The details of the report were positive,” Shaun Osborne, chief currency strategist at Scotiabank, said in a note. “Volume sales rose in the month while the preliminary data for October showed further strength.”
Speculators have added to their short positions in the Canadian dollar in recent weeks, raising them to the highest in six years, as data showed that the economy stalled in August and likely slipped into a shallow recession in the third quarter.
“The huge buildup of net CAD short positioning among speculative, institutional and real money accounts I’ve noted previously is perhaps starting to feel the pinch from price action,” Osborne said.
The price of oil, one of Canada’s major exports, was down 1.5 per cent at $75.97 a barrel ahead of next week’s OPEC+ meeting, which could bring some kind of agreement on production cuts in 2024.
Canadian government bond yields rose across the curve, tracking moves in U.S. Treasuries. The 10-year was up 3.4 basis points at 3.746 per cent, after touching on Wednesday its lowest level in more than two months at 3.588 per cent.