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Canadian Dollar Posts First Weekly Rise in Month on Job Gains

Canada’s dollar posted its first weekly advance in a month against its U.S. counterpart as higher-than-forecast employment growth added to speculation the central bank’s next move will be to raise borrowing costs.

The currency outperformed a majority of its major peers, strengthening as crude oil rose and a report showed April 5 that jobs gains last month were more than seven times greater than economists forecast. Canada will sell C$3.3 billion ($3.31 billion) of two-year bonds April 11.

“The Canadian dollar has held up amazingly well,” John Curran, senior vice president in Toronto at CanadianForex Ltd., an online foreign-exchange dealer, said in a telephone interview. “It was faring well against the crosses anyway. The strong jobs data punched it back into being an outperformer.”

The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to 99.72 cents per U.S. dollar as of 12:05 p.m. yesterday in New York. One Canadian dollar purchased $1.0028. It climbed 2.1 percent to C$.30525 versus the euro in the Good Friday holiday shortened week.

Employment (CANLNETJ) rose by 82,300 following a February decline of 2,800, lowering the jobless rate to 7.2 percent from 7.4 percent, according to Statistics Canada data. Economists surveyed by Bloomberg News had forecast a jobs increase of 10,500 and unemployment to remain at 7.4 percent.

Bank of Canada Governor Mark Carney said in an April 2 speech that the nation’s economy had topped his expectations in recent months.

Index Swaps

Odds of an increase in the Bank of Canada’s target rate by the December meeting swung to 26 percent after the report, with zero chance of a cut, according to Bloomberg calculations on overnight index (SPX) swaps. Odds before the report were about 17 percent each for a raise and a reduction.

Canada’s currency traded as low as C$1.0319 in early January before rallying to 98.42 cents per U.S. dollar last month as the Standard & Poor’s 500 Index gained. Optimism over accelerating global growth bolstered demand for Canada’s raw materials, which account for about half of export revenue.

Government bonds fell this week, pushing the yield on the benchmark 10-year note higher by two basis points, or 0.02 percentage point, to 2.13 percent. The yield reached 2.297 percent on March 19, the highest since October. It was as low as 1.887 percent in January.

The two-year notes being sold next week will have a coupon of 2.25 percent and mature Aug. 1, 2014, according to the Bank of Canada’s website. The previous auction of two-year bonds, on Feb. 29, drew an average yield of 1.116 percent and a coverage ratio -- the amount bid for the amount on offer -- of 2.15 times, versus a five auction average ratio of 2.42 times, Bank of Canada data show.

The loonie rose 0.6 percent over the past month in the fourth best performance among the 10 major currencies tracked by Bloomberg Correlation-Weighted Currency Indexes.

To contact the reporter on this story: Chris Fournier in Ottawa at cfournier3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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