TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday as oil prices rose and domestic jobs surged but still ended the week lower.
Canada added 48,300 jobs in January, Statistics Canada said, as hiring in the service sector helped the labor market build on its momentum from the latter part of 2016.
"It's another impressive read," said Desjardins Senior Economist Jimmy Jean.
He said the Bank of Canada would remain concerned about the quality of job creation and the number of hours worked but would be happy with the employment market's expansion.
The implied probability of a Bank of Canada interest rate hike by the end of the year rose to more than 40 percent. It was just 22 percent on Thursday morning before U.S. President Donald Trump's promise of a "phenomenal" tax plan in the next few weeks, which lifted bond yields. BOCWATCH
"The market is mispricing the risks around the Bank of Canada," said Ian Gordon, FX strategist at Bank of America Merrill Lynch.
"Their main concern is whether you continue to see a tightening in financial conditions driven by what's happening in the U.S."
U.S. crude CLc1 prices settled 86 cents higher at $53.86 a barrel after reports that Organization of the Petroleum Exporting Countries members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January. [O/R]
Oil is one of Canada's major exports.
The Canadian dollar CAD=D4 ended at C$1.3085 to the greenback, or 76.42 U.S. cents, stronger than Thursday's close of C$1.3141, or 76.10 U.S. cents.
The currency's weakest level of the session was C$1.3158, while it touched its strongest since Monday at C$1.3063.
Gains for the Canadian dollar came even as the greenback .DXY strengthened against a basket of major currencies.
Speculators increased bullish bets on the Canadian dollar, data from the Commodity Futures Trading Commission and Reuters calculations showed. Canadian dollar net long positions rose to 8,550 contracts as of Feb. 7 from 3,472 a week earlier.
Still, the loonie weakened 0.4 percent for the week after having posted a recent four-month high of C$1.2969.
Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR dipping 3.5 Canadian cents to yield 0.77 percent and the 10-year CA10YT=RR falling 11 Canadian cents to yield 1.693 percent.
The spread between Canada's two-year yield and its U.S. equivalent narrowed by 1 basis points to -42.4 basis points.
Reporting by Fergal Smith; Editing by Tom Brown