Canada’s Dollar Falls Most in 2 Weeks on Unexpected Drop in Jobs

The Canadian dollar declined the most in more than two weeks after employers unexpectedly eliminated jobs in February, reviving speculation the central bank may need to cut interest rates to bolster economic growth.

The currency, called the loonie, fell for the first time in three days as employment in the U.S., Canada’s biggest trade partner, rose more than forecast. The loonie gained for the past two days after the Bank of Canada kept its key interest rate unchanged, citing stronger-than-expected reports on growth and inflation, and said future moves will depend on economic data.

“It doesn’t juxtapose well against the U.S. number, and it probably gives the Bank of Canada full justification to be very soft with rhetoric now for another three months,” Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, said by phone from New York.

The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, weakened 0.9 percent to C$1.1087 per U.S. dollar at 5 p.m. in Toronto. It lost as much as 1.1 percent, the biggest intraday drop since Feb. 19, to C$1.1101. The currency touched C$1.0956 yesterday, the strongest since Feb. 19. One loonie buys 90.20 U.S. cents.

Canada’s dollar slipped 0.2 percent this week versus the greenback after gaining 0.6 percent in February. The loonie fell versus most of its 16 major peers today and this week.

Net Shorts

Hedge funds and other large speculators increased bets the loonie will weaken against its U.S. peer, data from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on a decline in the Canadian currency versus those on a gain -- net shorts -- was 61,096 on March 4, compared with net shorts of 58,591 a week earlier.

Canadian 10-year government bonds fell for a fourth day. Yields (GCAN10YR) on the benchmark securities increased as much as six basis points, or 0.06 percentage point, to 2.57 percent, the highest level since Feb. 21, before trading at 2.52 percent, up one basis point.

Employment declined by 7,000 positions, led by a drop in government workers, while the jobless rate was unchanged at 7.0 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 15,000-job increase and an unchanged jobless rate, according to median forecasts. The economy gained 29,400 jobs in January.

In the U.S., Canada’s biggest trade partner, employers added 175,000 jobs last month, the Labor Department reported. That followed a revised 129,000 increase in January that was bigger than initially estimated. The median forecast of economists in a Bloomberg survey called for a 149,000 advance in February. Unemployment rose to 6.7 percent from 6.6 percent as more people entered the labor force and couldn’t find work.

Benchmark Rate

The loonie slid in January to the weakest level since 2009, C$1.1224, after the Bank of Canada in a statement following a policy meeting cited prospects that inflation would stay low, fueling bets the rate might go down.

The central bank, which last met March 5, has held its benchmark interest rate at 1 percent since September 2010 to support the economy.

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

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

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