The Canadian dollar weakened from an almost six-week high against its U.S. counterpart as crude oil, the country’s biggest export, posted its biggest drop in more than four months.
The Canadian currency fell against the majority of its 16-most traded peers as a private report showed companies in the U.S. added fewer jobs than forecast in March, prompting speculation the government figures may trail projections when they are released April 5. A separate report will show Canada created 6,500 jobs in March after adding 50,700 the month before, according to a Bloomberg survey of 24 economists. U.S stocks fell the most in a month.
“Equities are getting killed, commodities are being sold off, and everyone is wondering why the Canadian dollar is not weaker than it is,” Darcy Browne, managing director of currencies at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said by phone from Toronto. “You have the key employment data coming on Friday, so I don’t think anyone wants to push it too far from here, especially two days ahead of potentially the dynamic in the market changing.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, was little changed at C$1.0146 at 5 p.m. in Toronto. The loonie touched C$1.0125 today and yesterday, matching the highest since Feb. 20. One loonie buys 98.56 U.S. cents.
Canada’s benchmark 10-year government bond rose with yields falling five basis points, or 0.05 percentage point, to 1.83 percent. The 1.5 percent security maturing in June 2023 rose 42 cents to C$96.99.
Futures on crude oil fell 2.7 percent to $94.55 per barrel in New York, after falling the most since Nov. 20. The Standard & Poor’s 500 Index of U.S. stocks declined 1.1 percent, after falling the most since Feb. 25.
The S&P GSCI Index of 24 commodities fell 2 percent.
The U.S. added 158,000 jobs in March, the smallest since October, after a revised 237,000 gain the prior month, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 39 economists surveyed by Bloomberg called for a 200,000 advance.
“The ADP number is certainly not the most encouraging sign for our largest trading partner.” said David Watt, chief economist at the Canadian unit of HSBC Holdings Plc., by phone from Toronto.
The cost to insure against declines in the Canadian dollar was 0.92 percent yesterday, almost its lowest in 10 weeks as traders bet the currency will rise.
The three-month so-called 25-delta risk reversal rate fell to 0.9 percent on April 1, the lowest since Jan. 23, the day Bank of Canada Governor Mark Carney said slower economic growth meant the need to raise interest rates was “less imminent.”
The change in guidance sent the loonie on its longest stretch of weekly losses in eight months and the cost of risk reversals to a five-month high. Risk reversals measure the premium on options contracts to sell Canadian dollars versus buying U.S. contracts that do the opposite.
The loonie strengthened earlier today as Australia’s Bureau of Statistics said imports outpaced exports by A$178 million ($186 million) in February. Economists surveyed by Bloomberg predicted a A$1 billion shortfall.
“It’s been a strong start for the commodity currencies, despite the fact it’s been a pretty poor day for commodities,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank. “Canada is perhaps along for a bit of a ride on their coattails and some short-covering, given the rather excessive positioning we’ve had in the market over the last little while.” A short position is a bet that an asset will decline in value.
The Canadian dollar has risen 1.5 percent in the past month against the currencies of nine developed-nation peers tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar has risen 0.1 percent and the euro has declined 1.5 percent.