CANADA FX DEBT-Canadian dollar hits two-month low as retail sales post monthly decline

By Reuters News

By Fergal Smith

TORONTO, Sept 24 (Reuters) - The Canadian dollar weakened against its US counterpart on Thursday as the greenback notched broad-based gains and after domestic retail sales data failed to lift investor concern about Canada's economic outlook.

The loonie was trading 0.2% lower at 1.4125 per US dollar, or 70.80 US cents, after touching its weakest intraday level since July 14 at 1.4149.

  • "The loonie’s slide looks more like a rates-and-USD story than a sudden Canada-specific shock," said Tony Valente, a senior FX dealer at AscendantFX.

  • The US dollar .DXY rose to a two-month high against a basket of major currencies as investors bet on additional Federal Reserve interest rate hikes following recent strong economic data.

  • "The lack of a trade and tariffs agreement with the US isn’t helping the cause either," Valente said. "That uncertainty is weighing on the Canadian growth outlook and limiting the Bank of Canada’s room to move, with this morning’s disappointing domestic retail sales data adding to the evidence of softer domestic demand."

  • Canadian retail sales fell by 0.7% in July, led by declines at general merchandise retailers. A preliminary estimate showed sales rebounding by 1.3% in August but analysts don't expect to see sustained strength.

  • "We doubt the momentum can last given renewed trade tensions that are set to cause the unemployment rate to rise, while elevated gasoline prices will also eat into discretionary spending power in the near term," Katherine Judge, a senior economist at CIBC Capital Markets, said in a note.

  • US crude oil futures were trading 2.3% higher at $94.25 a barrel as the US and Iran discussed a phased deal to reopen the Strait of Hormuz and end a US blockade. Oil is one of Canada's major exports.

  • Canadian bond yields were mixed across a steeper curve, tracking moves in US Treasuries.

  • The 2-year eased 1.6 basis points to 3.384%, while the 10-year was barely changed at 3.956% after earlier touching its highest level since November 2023 at 3.990%.

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