By Solarina Ho
TORONTO, Aug 14 (Reuters) - The Canadian dollar strengthened against the U.S. dollar on Tuesday, underpinned by better-than-expected economic data south of the border.
U.S. retail sales rose for the first time in four months, growing by 0.8 percent in July and far exceeding the 0.3 percent expectation among economists polled by Reuters. The results sparked hope that consumers could fuel quicker economic growth in the third quarter. "It was modestly risk-on from better-than-expected indicators," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets, noting that the retail sales data -- which lifted expectations for oil demand -- was indirectly positive for oil-rich Canada. The Canadian dollar closed at C$0.9919 versus the greenback, or $1.0082, from C$0.9925, or $1.0076 at Monday's close. It had strengthened to as much as C$0.9906, or $1.0095 earlier in the session, immediately after the retail sales data.
"It's only one month's data in a fresh quarter, but this is a pretty impressive U.S. retail sales print," Derek Holt, an economist with Scotiabank, said in a research note.
Ongoing concerns over the broader euro zone dampened news that Germany's economy grew modestly during the second quarter, while the overall euro zone economy narrowly avoided a recession during the first half of 2012.
The Canadian currency weakened overnight after the euro zone data was released, touching a session low against the U.S. dollar at C$0.9941, or $1.0060.
Mazen Issa, macro strategist at TD Securities, expected the Canadian dollar to stay within a tight range between C$0.9915 and C$0.9941 versus the greenback, pending the release of Canadian and U.S. CPI data later this week.
Canadian manufacturing sales data, expected on Thursday, will also be in focus.
"We are actually a little bit worried about manufacturing sales," said Chandler. "It's possible we could give back some of the gains." Canadian bond prices were mostly lower. The two-year bond slipped 8.5 Canadian cents to yield 1.185 percent, and the benchmark 10-year bond fell 50 Canadian cents to yield 1.856 percent. ($1=$0.99 Canadian)Additional reporting by Jon Cook; Editing by Chizu Nomiyama)
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