By John McCrank
TORONTO (Reuters) - The Canadian dollar rose against the U.S. dollar on Wednesday, strengthening overnight on higher oil prices, then falling off from its high for the day as June retail sales data showed a drop in sales volumes.
Canadian bond prices were mixed, but mostly lower, as the data pointed to some domestic strength in the economy.
At 9:29 a.m. (1329 GMT), the Canadian dollar was at C$1.0602 to the U.S. dollar, or 94.32 U.S. cents, up from C$1.0610 to the U.S. dollar, or 94.25 U.S. cents, at Tuesday's close.
The currency initially sold off in the overseas session due to U.S. dollar strength, but rising oil prices helped it turn around and hit a high of C$1.0570 early in the North American session.
U.S. crude oil topped $116 a barrel ahead of a weekly U.S.
inventory report. See
The main Canada-specific event for the day for the Forex markets was a report on June retail sales, which came in above expectations, but did not help the Canadian dollar continue its move higher against the greenback.
High energy prices pushed up Canadian retail sales in June by 0.5 percent from May and by an unexpectedly steep 1.4 percent if auto and gasoline sales are excluded.
Analysts had expected growth of 0.4 percent for retail sales and 0.5 percent for sales excluding autos.
"A reasonably encouraging figure, although some of the details weren't quite as strong as the headline number," said Steve Butler, director of foreign exchange at Scotia Capital.
"If you break it down, you see that the ex-autos was a very strong number, but a lot of it didn't have to do with volume, it had to do with prices being higher, and obviously, we are all concerned about inflation."
Stripping out the price effects, sales actually fell 0.4 percent in volume terms in the month.
The next big Canadian data release will zero in on inflation, with the consumer price index for July on Thursday.
In the meantime, Butler said the Canadian dollar will key off of the U.S. weekly oil data at 1435 GMT.
BOND PRICES MOSTLY LOWER
Canadian bond prices were mixed, but mostly lower in response to the retail sales data.
"A bit of a knee-jerk response to the core figure," said Mark Chandler, fixed income strategist at RBC Capital Markets.
Chandler added the move lower may have been a bit overdone though, given the fact that the volume of sales were down.
Earlier, the Canadian market had been following the larger U.S. market, which is up on a safe haven bid driven by concerns over the U.S. financial sector.
The overnight Canadian Libor rate was 2.9550 percent, down from 2.9883 percent on Tuesday.
Tuesday's CORRA rate was 2.9958 percent, down from 3.0128 percent on Monday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond fell 5 Canadian cents to C$101.69 to yield 2.765 percent. The 10-year bond rose 3 Canadian cents to C$105.68 to yield 3.556 percent.
The yield spread between the two-year and 10-year bond was 80.7 basis points, down from 83.1 basis points at the previous close.
The 30-year bond added 5 Canadian cents to C$116.70 for a yield of 4.015 percent. In the United States, the 30-year treasury yielded 4.446 percent.
The three-month when-issued T-bill yielded 2.52 percent, up from 2.45 percent at the previous close.
(Editing by Scott Anderson)
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