Canadian Dollar Rallies Within Recent Ranges

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Canadian Dollar Rallies Within Recent Ranges

  By Karen Johnson
  Of DOW JONES NEWSWIRES

TORONTO (Dow Jones)--The Canadian dollar rallied within well-worn recent ranges overnight, after warmly received Spanish and Italian bond auctions helped to peel away worries about the European debt crisis.

It pared some gains early in the North American session as U.S. retail sales and weekly jobless claims data came in shy of market expectations.

The U.S. dollar was at C$1.0172 Thursday morning, from C$1.0195 late Wednesday, according to data provider CQG.

U.S. data were particularly disappointing in a market that lately has seen a stream of upside surprises. They were a "double dose of troubling developments on the consumer spending and jobs front" for the U.S., said Jennifer Lee, senior economist at BMO Capital Markets in Toronto.

December retail sales rose a mere 0.1%, missing consensus forecasts and suggesting that U.S. spending growth might be waning.

The Federal Reserve's Beige Book, released Wednesday, probably helped inflate market hopes for positive news about the holiday shopping season, pointing to better activity across several sectors -- among them, retail sales.

Meanwhile on Thursday, U.S. initial jobless claims unexpectedly ticked higher close to the crucial 400,000 mark after trending lower since mid-September in a slow and steady pattern of improvement.

While the data all alone might not change the overall picture of the U.S. recovery, they do suggest that the road ahead may be bumpy.

"Of course," said BMO's Lee, "no one thought the road would be smoothly paved."

In Europe, the Spanish government sold about EUR10 billion in shorter-dated bonds -- about double what it had planned -- at yields that were comfortably below market rates.

Separately, Italy sold 12-month and flexible Treasury bills for an average 2.735% yield -- less than half the yield demanded for similar securities a month ago.

The European Central Bank held its key rate steady at 1.0% after two consecutive cuts. And the Bank of England also held its rate steady, as expected, and didn't alter the size of its asset-purchase program.

-By Karen Johnson, Dow Jones Newswires; 416-306-2022; karen.johnson@dowjones.com

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