U.S. data helps fuel Canadian dollar rally

Fri Aug 3, 2012 12:57pm EDT
 
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar traded at a stronger level than the U.S. currency on Friday for the first time in more than 2 months as investors welcomed a U.S. jobs report that offered signs that the economy there is improving.

The currency climbed to a high of C$0.9980 to the greenback, or $1.0020, its strongest level since May 11, after the U.S. data.

Nonfarm payrolls rose 163,000 last month, beating economists' expectations for a 100,000 gain. The report was dimmed somewhat, however, by the increase in the jobless rate to 8.3 percent from 8.2 percent in June, even as more people gave up the search for work.

Still, the stronger-than-expected jobs growth suggested the economy of Canada's largest trading partner continues to expand.

"The argument behind the move today is much more fundamental in that if the U.S. economy is picking up jobs at a decent pace then ultimately it's going to reflect itself in a stronger economy, which is being priced into equity valuations," said Jack Spitz, managing director of foreign exchange at National Financial Bank, noting the rally in global stock markets.

At 12:30 p.m. EDT (1630 GMT), the Canadian dollar was at C$0.9983 against the greenback, or $1.0017, higher than Thursday's North American finish at C$1.0072, or 99.29 U.S. cents.

At the same time, some think the higher jobless rate could also still pressure the U.S. Federal Reserve to try to boost the economy with a third round of bond purchases.

"That's got investors thinking we'll see the Fed stepping in later in the year to provide stimulus, so that's increasing risk appetite and weakening the U.S. dollar across the board," said Darren Richardson, a senior corporate dealer at CanadianForex.   Continued...