The Canadian dollar edged lower against its broadly weaker U.S. counterpart on Tuesday as domestic data showed a likely drop for manufacturing sales in April, but the currency stayed within reach of last week’s 6-year high.
The loonie was trading 0.1 per cent lower at 1.2049 to the greenback, or 82.99 U.S. cents, having traded in a range of 1.2029 to 1.2056.
Last Tuesday, the loonie touched its strongest since May 2015 at 1.2013. It has climbed 5.7 per cent since the start of the year, the biggest gain among G10 currencies, bolstered by higher commodity prices and a hawkish shift last month from the Bank of Canada.
“There appears to be little concern at the central bank about the CAD and the message is clear that the central bank will keep policy settings aligned with the economy as it works towards its goals,” strategists at Scotiabank, including Shaun Osborne, said in a note.
“We continue to target a deeper push below 1.20 in the coming months,” the strategists said.
Speculators have raised their bullish bets on the Canadian dollar to the highest since November 2019, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday.
The U.S. dollar on Monday hit 4-1/2 month lows against a basket of peers as insistence from the U.S. Federal Reserve that policy would stay pat calmed fears about inflation forcing rates higher.
Canadian factory sales likely fell 1.1 per cent in April from March, giving back some of the previous month’s increase, a flash estimate from Statistics Canada showed. The decrease was mostly attributed to lower sales in the transportation equipment industry.
The price of oil, one of Canada’s major exports, was supported by tempered expectations of an early return of oil exporter Iran to international crude markets. U.S. crude prices were up 0.1 per cent at $66.13 a barrel.
Canadian government bond yields were lower across a flatter curve. The 10-year hit its lowest since May 10 at 1.505 per cent before edging up to 1.508 per cent, down 3.5 basis points on the day.
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