Canadian dollar gains offset by soft U.S. jobs data

Thu Apr 26, 2012 9:17am EDT
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By Jon Cook

TORONTO (Reuters) - Canada's dollar was little changed against its U.S. counterpart on Thursday after soft U.S. jobs data offset the currency's overnight surge to a seven-month high.

Weighing on the currency was U.S. data on Thursday that showed jobless claims fell slightly last week but a trend reading rose to its highest since January, the latest sign of a weaker pace of healing in the still-struggling labor market.

In testimony before a Senate committee on Wednesday, Bank of Canada Governor Mark Carney repeated that domestic economic conditions have improved to the point where "it may become necessary that some of the considerable monetary policy stimulus in Canada may need to be withdrawn.

That followed the Fed's renewed pledge to hold interest rates near zero until late 2014 and Chairman Ben Bernanke's comments that the central bank would not hesitate to resume asset purchases if necessary.

"The interest-rate picture is favoring the Canadian dollar at this point," said Matt Perrier, a director of foreign exchange sales at BMO Capital Markets.

"The market pricing of a move by the bank has been moved up and yesterday's comments out of the Fed suggest that they're still on hold by late 2014, barring any changes, so that's a positive for the Canadian dollar over the near term."

At 8:42 a.m. (1242 GMT), the Canadian dollar was at C$0.9832 versus the U.S. currency, or $1.0169, little changed from Wednesday's close at C$0.9835 against the U.S. dollar, or $1.0168. Overnight the currency hit C$0.9806, its highest since September 19.

The currency's gains were also pared by data that showed euro zone economic sentiment fell more than expected in April, driven by more pessimistic industry and services sectors, as the economy sinks into recession.   Continued...