Canadian Dollar Rallies as U.S., Canada Jobs Gains Fuel Demand

The Canadian dollar rose versus its U.S. peer as domestic employers added five times more jobs than forecast, adding to speculation Bank of Canada Governor Mark Carney will raise the central bank’s target interest rate.

The loonie, as the currency is nicknamed, strengthened to a two-week high as employers added 52,100 jobs in September, Statistics Canada reported in Ottawa. That exceeded forecasts for an increase of 10,000 jobs. A U.S. government report showed payrolls increased 114,000 and the unemployment rate unexpectedly dropped to 7.8 percent.

“The data was a significant upside surprise,” Mazen Issa, a strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, said in a phone interview. “The Bank of Canada will be concerned with how growth will evolve in this quarter and this year, but will likely continue to maintain its hawkish bias to take the overnight rate higher.”

Canada’s currency appreciated 0.2 percent to 97.86 cents per U.S. dollar at 5:00 p.m. in Toronto, reaching the the highest level since Sept. 21. The currency is up 0.5 percent this week. One Canadian dollar buys $1.0219.

The Standard & Poor’s 500 Index was little changed. Crude- oil futures lost 2 percent to $89.90 a barrel in New York, dropping for the third straight week on signals that supply is exceeding demand. Oil is Canada’s largest export.

Jobs Growth

Canadian employment rose following an August gain of 34,300, Statistics Canada said. The nation’s jobless rate rose to 7.4 percent from 7.3 percent as the labor force grew by 72,600. The job gain exceeded all 24 forecasts in a Bloomberg economist surveyed, while the unemployment rate was forecast to be unchanged.

Statistics Canada delayed the release of the data by 91 seconds today, citing technical issues with their website.

At 8:30 a.m. Ottawa time, Statistics Canada media officer Yves Chartrand declined to open the connection that would allow media participating in a lock-up to release data to the public, according to normal procedure. Chartrand told reporters in the lock-up he was asked to keep them in the room and not allow them to file their stories or access their mobile phones until he had authorization from a supervisor. Chartrand said it was due to a “technical problem.”

“The economic fundamentals of Canada are still pretty sound,” Steve Butler, director of foreign-exchange trading in Toronto at a unit of Bank of Nova Scotia (BNS), said before the report. “A strong employment number gives support to the Bank of Canada’s stance that they would prefer to withdraw stimulus sooner rather than later.”

Bonds Decline

Government bonds fell the most in three weeks, with the yield on the 10-year government security rising five basis points, or 0.05 percentage point, to 1.81 percent. The 2.75 security maturing in June 2022 lost 43 cents to C$108.33.

The Bank of Canada will auction C$2.7 billion ($2.8 billion) in three-year notes on Oct. 10. The last sale of this note maturity on Aug. 29 was C$2.9 billion and yielded 1.278 with a bid-to-cover ratio of 2.73.

Carney held his key lending rate at 1 percent on Sept. 5, where it’s been since September 2010, the longest unchanged period since the 1950s. Carney reiterated that an increase “may become appropriate” as domestic spending props up an economic recovery restrained by weak global demand for exports.

Bank of Canada Senior Deputy Governor Tiff Macklem reiterated yesterday that policy makers may withdraw monetary stimulus as the nation’s economy recovers.

Central Bank

“To the extent that the economic expansion continues and the excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate,” Macklem said yesterday during a speech in Winnipeg, Manitoba.

The U.S. economy added workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000. The jobless rate dropped from 8.1 percent and hourly earnings climbed more than forecast.

Canada’s dollar has gained 2.1 percent this year against nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Currency Indexes. The greenback has dropped 2.6 percent.

To contact the reporters on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net

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

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