Canadian Dollar Rises as September Jobs Growth Exceeds Forecast

Canada’s dollar snappped a four-day loss against its U.S. counterpart after a report showed jobs growth last month exceeded forecasts and the unemployment rate unexpectedly fell.

The loonie, as the currency is nicknamed, strengthened as Canada added 11,900 jobs in September and the unemployment rate fell to 6.9 percent. Economists surveyed by Bloomberg News projected a 10,000 job increase and an unchanged jobless rate at 7.1 percent, according to the median forecasts. The currency has fallen this week as politicians in the U.S., Canada’s biggest trade partner, face a stalemate on agreements to fund the government and raise the nation’s debt limit.

“The data was fairly positive for Canada today, which has given some strength to the Canadian dollar,” said Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit. “The main driver for the loonie is still the U.S. fiscal situation. There has been some momentum there, but the situation remains in flux.”

The loonie rose 0.5 percent to C$1.0349 at 5 p.m. in Toronto, paring its weekly loss to 0.5 percent. One Canadian dollar buys 96.63 U.S. cents.

Bonds Rally

The nation’s benchmark 10-year government yield was little changed at 2.59 percent. The price of the 1.5 percent securities maturing in June 2023 lost one cent to C$90.76.

Canada plans to auction C$3.3 billion ($3.2 billion) of two-year notes on Oct. 16, according to the Bank of Canada website.

The Bank of Canada will raise rates next year even after a central banker warned the nation’s growth is falling short of forecasts, according to a survey of economists that diverges from market gauges.

The central bank policy rate will climb to 1.25 percent from 1 percent in the fourth quarter of 2014, according to the median estimate in a Bloomberg October Canada Economic survey, which had 19 responses. The forecast contrasts with trading in overnight index swaps yesterday that put the odds of a rate increase in 2014 at less than half.

Central Bank

The central bank may delay raising its policy interest rate until the first half of 2015, Royal Bank of Canada’s capital markets unit said today.

“There is a non-trivial risk that our current 3Q 2014 policy call may be threatened,” Ian Pollick, RBC economist, said in a note to clients. An increase in the first half of 2015 “is becoming more realistic,” he said.

Full-time employment rose by 23,400 in September and part-time work fell by 11,500 positions. Private companies added 73,600 workers and public-sector employment fell by 16,300.

Bank of Canada Governor Stephen Poloz said his country’s economic growth has been disappointing and is showing gradual signs of regaining momentum. Gross domestic product must expand faster than 2.5 percent to reduce the slack in the economy, Poloz said at a news conference following Group of 20 meetings in Washington.

“The overall theme of the Canadian labor market is one of a slow march higher where the lackluster pace is symbolic of the economy’s slow-go trajectory,” said Adrian Miller, director of fixed income strategies at GMP Securities LLC in New York. ”We look for the BOC to remain on the sidelines at least through fourth quarter 2014 and perhaps even first quarter 2015 before we see a hike in rates.”

Canadian business optimism over new investments fell to a four-year low in a central bank survey that also showed improved predictions about future sales growth.

The balance of opinion for investment intentions declined to 7 percentage points from 9 in the Bank of Canada’s third-quarter survey of about 100 executives, extending a slide from a peak of 36 points three years ago. The balance of opinion for sales growth over the next 12 months rose to 31 percentage points from 9 points.

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