Canadian Dollar Trades at Almost 1-Month High After Jobs Gains

  • Currency is No. 2 performer this year among its G-10 peers
  • Crude oil declines, offsetting Friday strength in loonie

The Canadian dollar traded close to a one-month high after a report showed May employment gains were higher than forecast.

The currency headed a third weekly gain, the longest streak since April, as Canada’s jobless rate fell to the lowest since July last month. It erased gains Friday as a decline in crude oil prices, one of the nation’s biggest exports, fell for a second day.

"A decent report is what is really the catalyst," said Bipan Rai, executive director of foreign exchange and macro strategy at Canadian Imperial Bank of Commerce in Toronto. "The second quarter is going to be soft for the Canadian economy and we should still be looking for a softer loonie into the start of the next quarter."

The Canadian dollar has gained 9 percent this year, the second-best performing Group-of-10 currency after the yen, as the price of crude oil has rallied to above $50 a barrel. The loonie, as the Canadian dollar is known, was the best performing among developed currencies until early May, when data showed that Canada’s trade deficit widened to a record in March.

The currency fell 0.2 percent to C$1.2749 per U.S. dollar as of 10:49 a.m. in Toronto, after gaining as much as 0.5 percent. It has added 1.5 percent this week. One loonie buys 78.46 U.S. cents.

Crude oil futures dropped 1.3 percent to $49.88 a barrel in New York after reaching $51.67 a barrel Thursday.

Canadian companies added 13,800 jobs, compared with a forecast for 1,800 jobs, according to the median estimate in a Bloomberg survey of economists. The unemployment rate fell to 6.9 percent from 7.1 percent.

Some of the full-time jobs turned out to be government positions, taking the edge off of the market reaction, said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. In addition, he said Bank of Canada Governor Stephen Poloz has been expressing caution about the economic outlook.

"I struggle to think the Canadian dollar is going to do that much better at the moment," Osborne said. He said the currency may weaken to the C$1.33-C$1.35 area.

The Canadian dollar will fall to C$1.30 by the end of the year, according to forecasts compiled by Bloomberg.

Hedge funds and other large speculators started betting in the Canadian dollar’s favor in April, ending their longest sustained bearish stance since 2001, according to data from the Commodity Futures Trading Commission. Bullish positions exceeded bearish bets by a net 26,259 contracts as of May 31.

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