Canadian dollar dips with oil; pares losses after domestic data

TORONTO (Reuters) - The Canadian dollar weakened on Thursday against its U.S. counterpart as oil prices fell, but pared some losses after domestic data showed much stronger-than-expected growth in wholesale trade.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The 1.5 percent increase in July wholesale trade exceeded economists’ forecasts for a decline of 0.9 percent and was the biggest increase since January, data from Statistics Canada showed. Stripping out the effects of price changes, volumes were even stronger, up 2.1 percent.

The strength of the data has boosted the outlook for growth in the economy for the month, offsetting soft manufacturing data, Nick Exarhos, an economist at CIBC Capital Markets, said in a research note.

Economists will turn to Canada’s retail sales report, due on Friday, for further clues on prospects for July gross domestic product. The country’s August inflation report is also due on Friday.

Prices of oil, one of Canada’s major exports, gave up some recent gains before a meeting of oil producers that could extend production limits aimed at clearing a glut.

U.S. crude CLc1 prices were down 0.47 percent at $50.45 a barrel.

At 9:14 a.m. ET (1314 GMT), the Canadian dollar CAD=D4 was trading at C$1.2346 to the greenback, or 81.00 U.S. cents, down 0.2 percent.

The currency traded in a range of C$1.2323 to C$1.2368.

On Wednesday, the loonie hit a 2-week low at C$1.2390 after the Federal Reserve signaled that it expected to raise interest rates once more by year-end.

Mexico and Canada will survive current talks with the United States on trade relatively unscathed, according to a Reuters poll of economists, suggesting U.S. President Donald Trump’s protectionist threats still have more bark than bite.

Canadian government bond prices were little changed across the yield curve, with the two-year CA2YT=RR up 0.5 Canadian cent to yield 1.578 percent and the 10-year CA10YT=RR rising 2 Canadian cents to yield 2.103 percent.

The 10-year yield hovered below a nearly three-year high of 2.119 percent reached earlier this week.

Still, global investors are warming up to Canadian bonds and their newly attractive yields, saying there is a limit to how much the Bank of Canada can diverge from its peers after its two interest rate hikes this year.

Reporting by Fergal Smith; Editing by Meredith Mazzilli