Canada Dollar Reaches Weakest in 5 Years on Jobs Loss

The Canadian dollar touched a five-year low as data showed the economy lost jobs in November while U.S. payrolls swelled, adding to speculation the Federal Reserve will raise interest rates before the Bank of Canada.

The currency headed for a second weekly loss as the report showed employment fell by 10,700 jobs. The drop bolstered a Bank of Canada statement this week that, while the recovery shows signs of broadening, the labor market “continues to indicate significant slack in the economy.” The nation added jobs in the previous two months.

“The focus is going to be on the strong upside release in the U.S. and how that’s likely to fuel strong U.S. dollar and pull in expectations for the first rate hike,” said Camilla Sutton, chief foreign-exchange strategist at Bank of Nova Scotia, by phone from Toronto. “You have to put the weak Canadian report into perspective. We’ve had two months of significant job gains, and one month doesn’t reverse that.”

The loonie, as Canada’s currency is known for the image of the aquatic bird on the C$1 coin, depreciated 0.6 percent to C$1.1449 per U.S. dollar at 10:27 a.m. Toronto time. It touched C$1.1476, the weakest since July 2009, and was poised for a 0.2 percent five-day loss. One Canadian dollar buys 87.34 U.S. cents.

Canadian government bonds fell, pushing the yield on the benchmark 10-year security up four basis points, or 0.04 percentage point, to 1.95 percent. It reached 1.98 percent, the highest level since Nov. 25. The price of the debt dropped 39 cents to C$104.74.

Canada, U.S.

Employment declined after jumps of 43,100 and 74,100 the last two months, Statistics Canada said today from Ottawa. The unemployment rate rose to 6.6 percent from a six-year low of 6.5 percent. Economists surveyed by Bloomberg News projected employment would be unchanged and the jobless rate would rise to 6.6 percent, according to median forecasts.

U.S. nonfarm payrolls increased by 321,000 jobs last month, the government reported, versus a Bloomberg survey’s forecast for a gain of 230,000. The unemployment rate held at a six-year low of 5.8 percent.

The Bank of Canada has kept its benchmark interest-rate unchanged for the longest in almost 65 years. The U.S. central bank is considering when to raise rates next year.

The Fed ended a bond-purchase stimulus program in October and is weighing growth in the labor market as policy makers consider when the economy will be strong enough to withstand higher borrowing costs. The benchmark rate has been in a range of zero to 0.25 percent since 2008.

BOC Rate

The BOC held its key rate this week at 1 percent, where it has stayed since September 2010, the longest pause since the period from February 1944 to September 1950. The central bank said while a long-awaited shift to an economy driven by exports and business investment may have begun, risks remain.

Canadian policy makers won’t raise interest rates until the end of next year, according to the median estimate of economists surveyed by Bloomberg from Nov. 7 to Nov. 12.

The loonie rallied 0.8 percent to C$1.1329 on Nov. 7 when Statistics Canada reported the economy added jobs in October, versus a forecast for a decline of 5,000.

(Corrects size of U.S. jobs gain in seventh paragraph.)
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