Canada dollar suffers worst weekly drop in 2012

Fri May 4, 2012 4:29pm EDT
 
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar sank against its U.S. counterpart on Friday and clocked its worst weekly performance so far this year as expectations eased that the Bank of Canada will hike interest rates and U.S. jobs data raised concerns about the pace of economic recovery.

The currency shed 1.5 percent for the week, the worst weekly performance since mid-December. After soaring to a seven-month high in April on more hawkish language from the Bank of Canada, the Canadian dollar retreated in recent sessions as data threw into question the pace of recovery, analysts say.<CAD/POLL>

Friday's U.S. employment report was the latest reading to fuel worries about a slowing recovery. Employers decreased hiring for the third straight month, adding 115,000 workers in April, well below forecasts of 170,000 and even below the depressed expectations of traders that had fallen during the week after a series of softer economic data.

The currency finished at C$0.9955 versus the U.S. dollar, or $1.0045, its third consecutive declines, down from Thursday's close at C$0.9889 versus the greenback, or $1.0112.

"The Canadian dollar actually appreciated over the past two weeks since the Bank of Canada announced they were considering rate hikes. Now it's more of investors are looking at the incoming data and they're getting a little more concerned," said Charles St-Arnaud, economist and currency strategist at Nomura Securities in New York.

"Obviously today you had a very weak employment that kind of signaled the U.S. economy may not be growing as fast as people were expecting."

The Canadian dollar see-sawed immediately after the jobs report, which provided mixed messages about the economy's strength ahead of President Barack Obama's November re-election bid. The report was not all negative. The government revised upward earlier estimates for payroll growth in February and March by a combined 53,000 jobs.

"I think it's confusing because there's a complication of how quantitative easing expectations play into it," said Camilla Sutton, chief currency strategist at Scotiabank.   Continued...