Dollar Hits 7-month High Against Loonie After Soft Canadian Retail Sales

By Joseph AdinolfiMarketsMarketWatch Pulse

The U.S. dollar strengthened Friday against the Canadian dollar, rising to a seven-month high after sales at Canadian retailers fell in October for a third straight month. Meanwhile, consumer-price index climbed 1.3%, leaving inflation well below the Bank of Canada's 2% target. The dollar rose to C$1.3334, up 0.6% from C$1.3229, putting it on track for its largest daily drop against the dollar in just under a month. Canadian yields fell, with the 10-year down 3.3 basis points at 1.136%. Earlier in the week, the Bank of Canada revised down its growth and inflation forecasts, and pushed back its expectations for the closing of the country's productivity gap. The BOC's downbeat tone bolstered expectations that the central bank could cut its benchmark interest rate in the near future. "They've already been talking about a soft economy this week, and the low CPI means they have the ability to do so without worrying about inflation," said Colin Cieszynski, chief market strategist at CMC markets. "That's why the loonie is plunging today."

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