The commodities-linked Canadian dollar firmed moderately against its U.S. counterpart on Tuesday, helped in part by stronger-than-expected Canadian retail sales growth, but gains were tempered by tumbling crude prices ahead of a closely-watched OPEC meeting.
Oil prices, which have declined 30 percent since June, fell to near four-year lows in volatile trading after a meeting between Saudi Arabia and three other nations ended with no deal to curb crude output. That left investors uncertain about the likely outcome of Thursday's OPEC summit that will decide production levels for next year. "I think we reacted finally a little bit to the slide in the oil prices this afternoon, so we bounced ... back to these middling levels," said Matt Perrier, managing director of foreign exchange sales of BMO Capital Markets. "With crude still trading heavy, looking like it is, the Canadian dollar should probably weaken off a little bit further." The Canadian dollar finished Tuesday's session at C$1.1253 to the greenback, or 88.87 U.S. cents, stronger than Monday's close of C$1.1289, or 88.58 U.S. cents. In Canada, a surge in the auto sector helped retail sales power ahead by 0.8 percent in September. Statistics Canada has already reported strong manufacturing, wholesale, export and building permits data for September, and retail sales was the last key piece of economic data ahead of Friday's gross domestic product growth figures. Martin Schwerdtfeger, a currency strategist at TD Securities, said the Canadian dollar was unlikely to make a big move ahead of the OPEC meeting and Friday's GDP data for the third quarter. "Those are going to be the key events. But we have to keep in mind that is going to be happening in an environment with less liquidity because of the U.S. (Thanksgiving) holiday," said Schwerdtfeger, noting that it will heighten the risk of more volatility. Canadian government bond prices were higher across the maturity curve, with the two-year climbing 5.2 Canadian cents, to yield 1.034 percent and the benchmark 10-year rising 30 Canadian cents to yield 1.947 percent.
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