The Canadian dollar fluctuated against its U.S. counterpart amid speculation the economy is slowing after an unexpected jobs loss last month.
The currency fell last week versus the U.S. dollar after Canada reported 54,500 fewer jobs in March, the biggest monthly employment decline since the country was in recession in 2009. The move was exacerbated by U.S. payroll data reported the same day that came in below economists’ estimates.
“We’re basically still moving on flows from last week,” Greg T. Moore, currency strategist at Toronto-Dominion Bank (TD), said by phone from Toronto. “There’s continued digestion of the dual Canadian and U.S. employment reports last Friday.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, gained 0.1 percent to C$1.0166 per U.S. dollar at 5 p.m. in Toronto, after rising 0.2 percent and falling 0.4 percent. One loonie buys 98.36 U.S. cents.
Canadian government bonds fell, with the yield rising 0.1 percent, or 0.01 percentage point, to 1.76 percent. The 1.5 percent note maturing in June 2023 dropped 12 cents to C$97.57. The Bank of Canada will auction C$2.7 billion ($2.7 billion) of securities maturing August 2016 on April 10.
Canada’s jobs figures brought the labor market more in line with other parts of the economy, where output growth slowed to a 0.6 percent annualized pace in the fourth quarter and inflation has lagged behind the central bank’s 2 percent target since May.
Hedge funds and other large speculators last week increased their bets the Canadian dollar will decline against the greenback, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 64,544 on April 2, compared with net shorts of 62,645 a week earlier.
The cost to insure against declines in the Canadian dollar versus its U.S. counterpart rose. The three-month so-called 25- delta risk reversal rate rose to 1.02 percent after reaching 0.89 percent on April 2, matching its lowest in 10 weeks. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.
The Bank of Canada’s March 6 policy statement called for the economy to “pick up through 2013” on its way to 2 percent annual growth. The central bank reduced its forecast in January from an October prediction of 2.3 percent, and said the economy will reach full output in the second half of 2014, at least six months later than it previously forecast.
Canada’s dollar resumed a bearish bias after touching a six-week high on April 4, MacNeil Curry, head of foreign- exchange and interest-rates technical strategy at Bank of America Merill Lynch in New York, wrote in a note to clients. This trend may see the currency decline to C$1.0448, then to its October 2011 low of C$1.0658, he said.
The loonie has fallen 2.9 percent in the past six months against nine developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The U.S. dollar gained 1.4 percent and the euro rose 2.5 percent.
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