Canadian dollar outperforms G10 peers as economic outlook improves

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

TORONTO (Reuters) - The Canadian dollar strengthened across the board against G10 currencies on Tuesday as a jump in U.S. retail sales bolstered the economic outlook and domestic data showed record demand for Canadian securities in April.

A record increase in U.S. retail sales in May, following two straight months of declines, reinforced a growing belief that the worst may be over for the world’s largest economy, bolstering the U.S. dollar against a basket of major currencies.

“If you get a faster recovery than anticipated in retail sales south of the border, I think north of the border people feel encouraged that it is going to echo the same there,” said Amo Sahota, director at Klarity FX in San Francisco.

Foreign investors bought a record C$49.04 billion in Canadian securities in April, all in debt securities, Statistics Canada said. Canada runs a current account deficit so its economy is dependent on foreign inflows.

The Canadian dollar was trading 0.1% higher at 1.3562 to the greenback, or 73.74 U.S. cents. The currency, which on Monday hit a two-week low at 1.3685, traded in a range of 1.3504 to 1.3622.

The modest gain for the loonie came as Tiff Macklem, in his first public appearance as governor of the Bank of Canada, said the central bank would provide an updated assessment of the outlook for output and inflation when it announces its July interest rate decision.

The price of oil, one of Canada’s major exports, rose as Wall Street surged and the International Energy Agency increased its oil demand forecast for 2020. U.S. crude oil futures settled 3.4% higher at $38.38 a barrel.

Canadian government bond yields were higher across a steeper curve, with the 10-year up 3.6 basis points at 0.555%. On Monday, the 10-year yield hit a one-month low at 0.468%.

Reporting by Fergal Smith; Editing by Alistair Bell and Tom Brown