Canadian Dollar Reaches 5 1/2-Year Low as Jobs Fall Second Month

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Canada’s dollar weakened to a 5 1/2-year low after employment unexpectedly shrank last month as U.S. payrolls grew more than forecast, adding to speculation the Canadian economy is falling behind that of its biggest trade partner.

The currency dropped for a seventh week, the longest losing streak since November 2000, after data showed Canada lost jobs for a second month. It fell versus most major peers. Bank of Canada Governor Stephen Poloz said in December the slump in crude oil, the nation’s biggest export, will damp economic growth in this year, while the Federal Reserve indicated the U.S. was on course to an interest-rate increase in 2015.

“The story for Canada is an ongoing divergence between the Canadian economy and the U.S. economy,” said Camilla Sutton, chief foreign-exchange strategist at Bank of Nova Scotia, by phone from Toronto. “The jobs report just really highlights that divergence with a stronger U.S. economy and underperformance in Canada.”

The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 0.3 percent to C$1.1867 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.1890, the weakest level since May 2009, and dropped 0.7 percent on the week. One Canadian dollar purchases 84.27 U.S. cents.

Net Shorts

Hedge funds and other large speculators increased for a second straight week their futures bets the loonie will fall against the U.S. dollar, data released today by the Washington-based Commodity Futures Trading Commission showed. Bets against the currency outnumbered those for it -- so-called net shorts -- by 17,087 positions as of Jan. 6, the most since Dec. 5, the data show.

The currency has slid 8.8 percent since mid-June as crude oil tumbled amid a mismatch in supply and demand. Prices for the global benchmark, Brent crude, sank below $50 a barrel this week for the first time since 2009. Futures touched $48.90 today, after reaching a 2014 high of $115.71 in June.

Canadian benchmark 10-year government bonds climbed, pushing yields down five basis points, or 0.05 percentage point, to 1.66 percent.

Payrolls in Canada decreased by 4,300 jobs, following a drop of 10,700 in November. Economists surveyed by Bloomberg forecast a gain of 15,000 last month. U.S. employers added 252,000 jobs in December, more than projected, the Labor Department reported, and the jobless rate dropped to 5.6 percent, the lowest level since June 2008.

Jobless Rate

Canada’s unemployment rate was 6.6 percent, matching the previous month, while the labor-force participation rate fell to 65.9 percent, the lowest since 2001, as more people dropped out of the job market.

Job losses were led by declines in part-time positions, which dropped by 57,700, while full-time employment rose by 53,500, Statistics Canada figures showed.

“If you look at some of the details in full-time versus part-time, full time was fairly strong,” Greg T. Moore, a senior currency strategist at Royal Bank of Canada, said by phone from Toronto. “The story is still of very moderate, subdued employment gains, a subdued labor market.”

Bank of Canada policy makers meet Jan. 21 to decide whether to leave their key interest-rate target at 1 percent, where it’s been since September 2010.

Swaps traders now see only a 26 percent chance of an increase by year-end, according to Bloomberg calculations based on trading in overnight index swaps. Economists surveyed by Bloomberg in December forecast a rate boost by the end of 2015.

There’s a 50 percent possibility the Fed will raise its benchmark, which it has kept in a range of zero to 0.25 percent since 2008, in September, swaps trading showed.

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