Canada Dollar Trades Near Three-Week High as More Jobs Added Than Forecast
Canada’s dollar traded at almost a three-week high after a government report showed employers added more jobs in August than economists forecast, indicating the nation’s economic recovery is gaining momentum.
The currency pared gains after traders speculated its 1.8 percent advance over the past two weeks may be overdone. Bank of Canada Governor Mark Carney will speak at a press conference today, where he likely will be asked about future interest-rate increases. The gain in the nation’s payrolls reversed a decline in July.
“It’s a testament to the underlying strength of the Canadian economy relative to the U.S.,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit, said by phone from Toronto. “The Canadian dollar should trade a little bit higher.”
The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated as much as 0.5 percent to C$1.0288 per U.S. dollar, the strongest since Aug. 19, before trading at C$1.0325 at 10:52 a.m. in Toronto, up 0.1 percent. It closed yesterday at C$1.0339. One Canadian dollar buys 96.85 U.S. cents.
“The Canadian dollar has had a big week and I would not be surprised to see some profit taking,’’ Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit, said via e-mail.
Employers expanded payrolls by a net 35,800 jobs after cutting 9,300 positions in the previous month, Statistics Canada reported today in Ottawa. The median forecast in a Bloomberg News survey of 15 economists was for an increase of 30,000 jobs. The unemployment rate rose to 8.1 percent from 8 percent as more people entered the workforce.
Bonds Decline
Government bonds fell, pushing the 10-year note’s yield up 2 basis points, or 0.02 percentage point, to 2.98 percent. The price of the 3.5 percent security maturing in June 2020 dropped 13 cents to C$104.36.
Canada’s government bonds have lost investors 1.2 percent this month, paring the gain for 2010 to 5.8 percent, according to a Bank of America Merrill Lynch index.
The loonie was poised for a 0.6 percent gain over the past five days, strengthening after the Bank of Canada raised the target rate for overnight lending between banks on Sept. 8 to 1 percent from 0.75 percent. The boost matched quarter-percentage- point increases in June and July. Investors speculated the bank may raise the rate again by year-end.
Canada was the first Group of Seven country to increase borrowing costs after last year’s global recession. The nation is recovering from the slump faster than the U.S., its largest trading partner, having already returned to pre-recession levels of employment.
‘Solid’ Consumption Growth
The central bank said in a statement that the nation’s “consumption growth is expected to remain solid and business investment to rise strongly.” While policy-rate increases mean Canadian financial conditions “have tightened modestly,” they are still ‘’exceptionally accommodative,” the bank said.
“We’ll probably see a bit of interest-rate support coming through for the Canadian dollar in the short term, but I don’t think it’s sustainable,” Toronto Dominion’s Osborne said. “We think C$1.0275 is as much as the U.S. dollar is going to do on the downside.” He recommended investors “accumulate some dollars and look for a push back to C$1.05 or C$1.06.”
Canada’s dollar will weaken to C$1.05 by the end of this year, according to the median forecast of 33 economists and analysts surveyed by Bloomberg News.
Carney is scheduled to speak today in Calgary on restoring faith in the international monetary system. A text of his remarks will be published on the bank’s website at 11:40 a.m. New York time. He will hold a press conference at 2 p.m.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
Rate this Page