The Canadian dollar fell in its biggest decline in nine months against its U.S. peer after the nation unexpectedly lost jobs last month by the most since the last recession four years ago.
The currency declined against 13 of its 16 major peers as Canada had 54,500 fewer jobs in March, compared with the 6,500 gain predicted in the median estimate of a Bloomberg survey of 24 economists. The nation’s jobless rate increased to 7.2 percent from 7 percent. The U.S. added 88,000 jobs in March, versus estimates of a 190,000 gain. 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.
“Huge miss on both numbers, but particularly the Canadian number after many months of surprisingly strong employment data, we’ve finally seen some give back, so pretty swift reaction for the Canadian dollar,” said Blake Jespersen, managing director of foreign exchange at Bank of Montreal, by phone from Toronto. “There’s a lot more room for this to run, I think this is just the beginning of what could be a series of weaker employment numbers in Canada.”
The loonie, as the Canadian dollar is known for the image of the C$1 coin, fell 0.5 percent to C$1.0176 at 5 p.m. in Toronto. Earlier, it fell 1.1 percent to C$1.0236 per U.S. dollar, the largest drop since June 28. One loonie buys 98.27 U.S. cents.
Canada’s benchmark 10-year government bonds rose, with yields falling four basis points or 0.04 percentage point to 1.75 percent, touching the lowest level since Dec. 11. The 1.5 percent security maturing in June 2023 rose 36 cents to C$97.68.
Crude oil, the country’s biggest export, fell 0.3 percent to $93.02 per barrel in New York, after touching its lowest point since March 7. The Standard & Poor’s 500 Index of U.S. stocks fell 0.4 percent.
Canada’s jobs figures brings 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 the central bank’s 2 percent target since May. Last month’s figures mean Canada posted a net loss of 25,700 jobs in the first three months of the year.
“It was ugly across the board, there wasn’t one redeeming feature for the Canadian employment report,” said Mark Frey, chief market strategist at Cambridge Mercantile Group, a corporate currency broker, by phone from Victoria British Columbia. “When you look at the overall employment figures for Q1 in Canada, you’re seeing a pretty bleak outlook that has turned almost on a dime from the last five months of 2012.”
A separate report showed Canada recorded its 11th straight merchandise trade deficit in February, the longest streak in at least 25 years, with the shortfall unexpectedly widening as exports of metals declined.
The deficit of C$1.02 billion ($1 billion) followed a January figure that was revised to C$746 million from C$237 million, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast the string would end with a C$100 million surplus, based on the median of 21 forecasts.
“Obviously disappointment on both sides of the border,” said David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities unit by phone from Toronto. “The labor market is sort of catching up to the wider economic backdrop that we’ve always argued is still quite subdued, so this helps a little bit.”
In the U.S., Canada’s largest trading partner, the absence of sustained and bigger gains in employment and earnings underscores the Federal Reserve’s view that more progress is needed before record monetary policy stimulus that has devalued the currency can be scaled back.
Fed officials are waiting for sustained signs of job-market resilience before winding down their $85 billion of monthly bond purchases. Central bank policy makers reiterated in a March 20 statement that they would continue to buy securities until the labor market outlook improves “substantially.”
Automatic budget cuts that will take $109.3 billion from the U.S. government this year went into effect March 1.
“Today’s data just confirms some of those fears that sparked the selloff in equities recently and have been supporting fixed-income,” said Emanuella Enenajor, an economist at CIBC World Markets by phone from Toronto. “It’s the concern that the U.S. is starting see the impact of fiscal tightening, and that’s contributing to some of the weakness in the Canadian dollar.”
The Canadian dollar has lost 0.4 percent this year against nine developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar has added 2.4 percent and the euro is up 0.7 percent.