The Canadian dollar touched a three-year low on speculation slowing growth and risks of cooling inflation outweigh an improvement in the labor market.
The currency fell for a third week against its U.S. peer, the longest slump since August, after official data showed employment in Canada rose by 21,600 last month and the jobless rate remained 6.9 percent, the lowest since 2008. The Canadian dollar weakened beyond C$1.07 for the first time in three years Dec. 4 after the central bank kept interest rates at 1 percent and warned the risks of inflation remaining below its target band had increased.
“The BOC’s focus now is really on inflation and exports -- this jobs report is less important,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia, said by phone from Toronto. “The jobs report highlights things in Canada are better than other people thought.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.1 percent to C$1.0640 per U.S. dollar at 5 p.m. in Toronto after falling as much as 0.5 percent. The currency touched C$1.0708, the least since May 2010. It fell 0.2 percent this week after dropping 1.7 percent the previous two weeks. One loonie buys 93.99 U.S. cents.
Futures on crude oil, Canada’s biggest export, touched $98.07 per barrel in New York, its highest point since Oct. 29. before trading at $97.78.
Canada’s benchmark 10-year government bond yield rose two basis points, or 0.02 percentage point, to 2.69 percent. The price of the 1.5 percent security maturing in June 2023 fell 11 cents to C$90.11. The yield was 17 basis points lower than similar maturity U.S. securities after reaching 20 basis points on Nov. 28, the widest gap since February 2011.
The loonie’s 14-day relative strength index against the greenback was at 34 after reaching 25 yesterday, below the 30 threshold which may indicate the currency’s drop is losing momentum.
“The decline in the Canadian dollar has been too fast,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a phone interview. “I’m overall bearish on the CAD, we just need to see U.S. yields rise more. In the meantime, CAD will stay range-bound.” The loonie has traded between C$1.0611 and C$1.0708 this week.
Futures traders’ bets the loonie will fall against the greenback rose to the highest since May, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 41,583 on Dec. 3, the highest since the week ended May 14.
The loonie will reverse losses in the coming sessions based on chart patterns, according to John Curran, senior vice president at Canadian Forex Ltd., an online foreign-exchange dealer.
“There is now a triple top at the C$1.0700-to-C$1.0710 area posted over the last three days, which is a significant technical signal,” Curran said in an e-mail. “To add to this, we already have an outside day today, meaning a higher high and lower low than the previous day. It is a strong indicator of a reversal in trend.”
The loonie fluctuated against the greenback after adding the most jobs in three months, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News had projected a 12,000 gain, while predicting the unemployment to remain unchanged.
The U.S. dollar rose versus the yen after data showed payrolls increased by 203,000 in November, following a revised 200,000 advance the previous month, Labor Department figures showed in Washington. Economists called for a 185,000 advance in a survey. The jobless rate fell to 7 percent.
The Canadian dollar has lost 4.2 percent this year against nine developed-market peers tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar rose 3.5 percent. The euro is the biggest gainer, up 8 percent, while the yen’s 14 percent drop paced decliners
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