* C$ rises to 94.22 U.S. cents
* Bonds fall as risk appetite grows
* Canada retail sales gain points to GDP rise
(Updates to close, adds details)
By Ka Yan Ng
TORONTO, Dec 21 (Reuters) - The Canadian dollar rose
against the U.S. currency on Monday as investors' thirst for
risk was underpinned by strong equity markets and oil prices in
thin, pre-holiday trading.
The Canadian dollar hit its highest level in just over a
week during the European session, at 94.90 U.S. cents, but
pared gains throughout the session as the U.S. dollar mounted a
rally against several major currencies.
Better than expected domestic retail sales data also helped
the Canadian dollar retain gains against the greenback, but did
little to budge it out of its recent ranges.
Higher auto sales helped push retail trade up by 0.8
percent in October to a level nearly as high as a year earlier,
before the sharp declines seen in late 2008, Statistics Canada
"The Canadian dollar, even though it gained significantly
overnight, has really been unable to hold those gains. They
come in the midst of U.S. dollar buying everywhere else," said
Jack Spitz, managing director of foreign exchange at National
"Big win for Canada on the crosses, but overall against the
U.S. dollar it's still trading midpoint of a range that has
been well-defined for a number of months."
Spitz noted the Canadian dollar hit some key levels against
currencies such as the euro and sterling, while against the
greenback, the 20-, 50- and 90-day moving averages were all
within 112 basis points of one another.
The Canadian dollar finished at C$1.0614 to the U.S.
dollar, or 94.22 U.S. cents, up from C$1.0660 to the U.S.
dollar, or 93.81 U.S. cents, at Friday's close.
Traders bought back the greenback after selling it heavily
for most of the year and prepared for U.S. economic growth to
pick up steam in 2010. [FRX/]
"The debate continues whether the U.S. dollar is slipping
out of its traditional role and into pro-growth mode from a
safe-haven currency. I don't think the final word has been said
on that subject yet, but for the time being we've seen the U.S.
dollar do quite nicely," said Eric Lascelles, chief economics
and rates strategist at TD Securities.
"Canada is defying the trend here. The retail sales numbers
are helping a little bit."
The price of oil <CLc1>, a key Canadian export, rose
towards $74 a barrel, while Toronto's main stock index also
rallied. The Canadian dollar often takes direction from the
stock and energy markets as a barometer of risk appetite.
Canadian bond prices were lower across the curve as
investors found favor with riskier assets such as stocks.
Major North American equity markets finished nearly 1
percent higher, bolstered by oil prices and broker upgrades of
key issues. [.TO] [STXNEWS/US]
The domestic retail sales data also reinforced expectations
of a consumer-led gain in real gross domestic product for
October, which would bolster the fourth-quarter reading of
growth after Canada barely exited recession in the last
That would pave the way for eventual rate increases by the
Bank of Canada if the strength in the economy is sustained. The
central bank has pledged to keep rates low until the end of the
first half of 2010.
"Often, with retail sales out of the way, the market can
look forward to GDP. It does seem that Canada will get a second
positive figure there and in all likelihood hit quite an
attractive fourth quarter," said Lascelles.
October GDP is due on Wednesday, with analysts expecting a
reading of 0.3 percent growth.
In another positive economic sign, consumer confidence in
Canada edged higher in December after dropping for two straight
The two-year government bond <CA2YT=RR> fell 10 Canadian
cents to C$99.79 to yield 1.360 percent, while the 30-year bond
<CA30YT=RR> dropped 79 Canadian cents to C$114.95 to yield
Canadian notes outperformed U.S. bonds, with the 10-year
yield spread widening to 16.8 basis points below its U.S.
counterpart from 13.9 basis points the previous sessio