The U.S. dollar rose against its Canadian counterpart on Wednesday, as strong U.S. data boosted optimism over the economy and added to expectations for a U.S. rate hike in the near future.
USD/CAD hit 1.3115 during early U.S. trade, the highest since Monday; the pair subsequently consolidated at 1.3104, gaining 0.23%.
The pair was likely to find support at 1.3022, Tuesday’s low and a one-week trough and resistance at 1.3161, the high of February 10.
The Commerce Department said that consumer prices increased by 0.6% last month, compared to forecasts for a 0.3% rise. Year-over-year, consumer prices climbed 2.5% in January.
Core consumer prices, which exclude food and energy costs, increased by 0.3%, above expectations for 0.2%.
A separate report showed that U.S. retail sales rose 0.4% in January, compared to expectations for a 0.1% increase.
Core retail sales, which exclude automobile sales, increased by 0.8% in January, compared to forecasts for an advance of 0.4%.
The dollar also remained supported since Ms. Yellen told the U.S. Senate Banking Committee on Tuesday that waiting too long to raise interest rates would be “unwise,” given the rise in inflation and economic growth.
In Canada, official data on Wednesday showed that manufacturing sales rose 2.3% in December, exceeding expectations for an uptick of 0.2%. Manufacturing sales gained 2.3% in November, whose figure was revised from a previously estimated 1.5% rise.
However, a decline in oil prices dampened demand for the commodity-related Canadian currency, as traders awaited the weekly inventory data due later in the day.
The loonie was higher against the euro, with EUR/CAD edging down 0.12% to 1.3812.
Sentiment on the single currency remained vulnerable amid concerns over Greece’s bailout negotiations and the possibility of a Brexit or Trump-style shock result in France’s upcoming presidential election.