The Canadian dollar fell against its U.S. counterpart for the first time this week as U.S retail sales dropped the most in nine months and reports came that steps to strengthen Europe’s financial system were faltering.
The currency pared a weekly gain against the greenback as U.S. retail sales fell 0.4% in March after a 1.1% gain the month before. Cyprus was forced to deny it required additional European aid and Germany’s Handelsblatt newspaper reported a discussion on direct bank recapitalization from Europe’s bailout fund was “going in circles.”
“One of the reasons people bought Canada was the expectation the U.S. would recover,” said Sebastien Galy, a foreign-exchange strategist at Societe Generale SA, by phone from New York. “The business cycle in the U.S. is showing increasingly some signs of softness which might last a while.”
The loonie, as the Canadian dollar is known for the image of the waterfowl on the C$1 coin, fell 0.1% to C$1.0115 per U.S. dollar at 9:45 a.m. in Toronto. The currency has gained 0.6% this week. One loonie buys 98.86 U.S. cents.
The Canadian dollar should fall to C$1.02 per U.S dollar, Galy said, before rising again as the U.S. recovery picks up later in the year.
“The Canadian story was a lot of hopes and I think that should calm down, we should settle in a range,” he said.
Canada’s 10-year government bonds rose, with yields falling three basis points or 0.03 percentage point to 1.75%. The 1.5% security maturing in June 2023 rose 30 cents to C$97.71.
Futures of crude oil, Canada’s largest export, fell 1.9% to $91.75 per barrel as the Standard & Poor’s 500 Index of U.S. stocks lost 0.2%.
“I wouldn’t be surprised if we see the Canadian dollar weaken off at a very gradual pace today,” said David Bradley, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Bank of Nova Scotia. “It’s just a risk- off scenario because of continuing problems in Europe that’s caused the Canadian dollar to sell off.”
The Canadian dollar traded below its 50-day moving average for the fourth straight day. The calculations, which indicate momentum, are seen by some traders as potential turning points in the direction of a currency’s price.