Canadian dollar rebounds as commodity currencies outperform

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar rose against the greenback on Monday, recouping some of last week's decline as China reported stronger-than-expected economic data and Bank of Canada Governor Tiff Macklem said Canada's economy is moving closer to full capacity.

The loonie was trading 0.3% higher at 1.2509 to the greenback, or 79.94 U.S. cents, after trading in a range of 1.2501 to 1.2556.

Among G10 currencies, only the Australian dollar notched a bigger gain. Canada and Australia are major commodity producers.

"G10 commodity currencies are largely undeterred by the latest downturn in oil prices," said Simon Harvey, senior FX market analyst for Monex Europe and Monex Canada.

U.S. crude oil futures settled 0.1% higher at $80.88 a barrel after hitting its lowest level in 10 days earlier in the day.

Commodity-linked currencies gained on news that China's industrial output and retail sales grew more quickly than expected in October.

The data was "constructive" for commodity demand, Harvey said.

Last week, the loonie declined 0.7%. On Friday, it touched its weakest intraday level in more than five weeks at 1.2604.

The Bank of Canada will not raise its benchmark interest rate until economic slack is absorbed, which has not yet happened but is getting closer, Macklem said in an opinion piece.

Canadian factory sales fell 3.0% in September from August as a shortage of semiconductors crimped sales of motor vehicles, while wholesale trade for the same month grew by 1.0%.

Separate data showed Canadian home sales rose 8.6% in October from September.

The Canadian 10-year was up 4.5 basis points at 1.720%, while the gap between it and the U.S. 10-year rate widened by nearly one basis point to 10 basis points in favor of the Canadian bond.

(Reporting by Fergal Smith; Editing by Andrea Ricci and Richard Chang)