Canada Dollar Gains Most in a Month on July Retail Sales Jump
By Haris Anwar
Sept. 21 (Bloomberg) -- Canada's dollar rose the most in a month after a report showed retail sales climbed to a record in July.
Traders bought the currency as sales advanced 1.5 percent to C$33 billion ($29.4 billion) in July, Statistics Canada said today in Ottawa. The monthly gain was almost double the 0.8 percent median forecast in a Bloomberg News survey.
``The number itself is very impressive, and provides a positive momentum to the Canadian dollar,'' said Jack Spitz, director of trading at National Bank of Canada in Toronto.
Canada's dollar rose 0.6 percent to 89.23 U.S. cents at 9:55 a.m. in Toronto, its biggest jump since Aug. 21. One U.S. dollar buys C$1.12070.
The Canadian dollar has gained 3.7 percent against its U.S. counterpart this year. It has declined from 91.44 U.S. cents on May 31, the highest since 91.47 U.S. cents on Jan. 4, 1978. Canada's exports of lumber, copper, crude oil and natural gas helped push the currency to annual gains the past four years.
Today's figures may fuel speculation consumer spending will drive an economy the Bank of Canada says is working at about full capacity.
The central bank kept its benchmark rate unchanged at 4.25 percent at meetings in July and on Sept. 6, after seven increases starting in September 2005. It said the risk of higher consumer spending and house prices was offset by a possible drop in U.S. demand.
`Continued Growth'
``The report shows continued growth in the Canadian economy,'' said Michael Woolfolk, senior currency strategist in New York at the Bank of New York. ``There is no immediate need for the Bank of Canada to raise interest rates. But if there is any type of bias on behalf of the Bank of Canada, it should be towards raising rates.''
The yield on Canada's December bankers' acceptances futures rose to 4.28 percent, from 4.275 percent yesterday. It's still down from 4.78 percent on June 28, the highest in the past year.
Bankers' acceptances futures settle at a three-month lending rate that has averaged 16 basis points, or 0.16 percentage point, above the central bank's rate target since Bloomberg started tracking the difference in 1992.
The currency fell to a one-month low yesterday as products including oil, zinc and nickel that make up 54 percent of Canada's exports extended a slump from their highs in May. The Reuters/Jefferies CRB commodities index touched a 14-month low yesterday.
``This is the beginning of the end'' of the Canadian dollar's rally, said Monica Fan, head of foreign-exchange strategy at RBC Capital Markets in London. ``We're going to see continued declines in commodities.''
The yield on Canada's benchmark 10-year bond was little changed at 4.08 percent. The price of the 4 percent bond due June 2016 rose 1 cent to C$99.33. Bond yields move inversely to prices. The yield fell to the lowest since January yesterday.
To contact the reporter on this story: Haris Anwar in Toronto at hanwar2@bloomberg.net .
Last Updated: September 21, 2006 10:14 EDT
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