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Canada dollar sags despite soaring wholesale sales

At 10:40 a.m., the Canadian dollar was at C$1.1584 to the U.S. dollar, or 86.33 U.S. cents, from C$1.1529 to the U.S. dollar, or 86.74 U.S. cents, at Thursday's close.

Canadian wholesale trade surged by 1.8 percent in January, far exceeding market expectations of a 0.3 percent rise, according to Statistics Canada data on Friday. It showed six of seven sectors advanced in the first month of the year.

"It was a barnburner by any definition," said Eric Lascelles, strategist at TD Securities. "Certainly this outcome does add to the likelihood of a decent monthly GDP number in January."

The loonie may be succumbing to a bit of profit-taking after four straight winning sessions, analysts said, and the weakness on Friday could also be related to softening commodity prices.

Meanwhile, there was little response to data showing output from U.S. factories, mines and utilities rose 0.7 percent as expected in February.

Capacity utilization, a measure of how close to full potential factories, mines and utilities are running, rose slightly less than expected to 81.2 percent, versus Wall Street expectations for capacity utilization to rise to 81.3 percent.

"Today's data won't be changing the outlook at all," said David Powell, currency strategist at IDEAglobal in New York.

He said the U.S. Federal Reserve was likely on track to raise interest rates at the end of the month.

But he said he expects the Bank of Canada will move to the sidelines on interest rates next month. This may help the currency slip to C$1.17 by the end of the month.

Most market players predict the central bank has at least one more rate hike left before it halts its credit tightening campaign.

The central bank has raised its overnight rate five straight times to 3.75 percent as it moves to head off inflation in an economy it says is running at capacity.