The Canadian dollar closed slightly higher Tuesday amid higher commodity prices and a stronger-than-expected retail sales report for November.
The currency ended up 0.06 of a cent to 100.74 cents (U.S.) a day before the Bank of Canada makes its next announcement on interest rates.
Traders expect no change in the bank’s key rate of 1 per cent but will look to the central bank for guidance as to the strength of the economy.
“We do expect some significant changes from the bank, particularly that they soften their outlook for near-term growth in Canada, but that this is offset by recognition of decreasing global risks and ongoing concern over the impact of high household debt in Canada on financial stability,” said Scotia Capital chief currency strategist Camilla Sutton.
“Accordingly, we expect the net result to be a Bank of Canada that retains a slightly hawkish tone, which in turn supports the Canadian dollar.”
Meanwhile, Statistics Canada reported that retail sales rose 0.2 per cent to $39.4-billion in November. Economists had expected a 0.2-per-cent dip in sales. It was the fifth consecutive monthly sales gain.
The agency said higher sales at motor vehicle and parts dealers as well as electronics and appliance stores more than offset declines at most store types.
Commodities were mixed, with February crude on the New York Mercantile Exchange up 68 cents to $96.24 (U.S.) a barrel.
The March copper contract in New York was up 3 cents to $3.71 a pound while February gold bullion gained $6.20 to $1,693.20 an ounce.
Traders also took in news from the Bank of Japan that it has set a 2 per cent inflation target and implemented open-ended asset purchases that will pump money into the financial system. The inflation target is aimed at helping the country emerge from its prolonged bout of deflation.
The central bank has not achieved even its 1 per cent inflation target, with price increases hovering below 0.5 per cent for the past two years despite surges in energy costs.
And a closely watched survey shows an unexpectedly sharp rise in German investor confidence.
The ZEW institute says Tuesday that its indicator of economic sentiment rose 24.6 points in January from the month before to an overall 31.5 points, its highest level since May, 2010. Economists had predicted a more modest rise to 12 points.Report Typo/Error