Canadian dollar weakens as greenback jumps ahead of jobs data

Thu Oct 6, 2016 5:13pm EDT
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar weakened against a broadly stronger U.S. counterpart on Thursday, with higher oil prices offering little support as investors brace for further evidence of monetary policy divergence between the two countries.

A potentially strong U.S. jobs report on Friday could further weaken the loonie, as Canada's currency is colloquially known, as investors increase bets that the Federal Reserve will raise U.S. interest rates later this year.

U.S. data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low.

Canada also reports September employment data on Friday, but the country's central bank is widely seen keeping rates on hold for a prolonged period, with some chance of a near-term cut.

"A beat in tomorrow's (U.S.) numbers will go a long way to making the December meeting a quote-unquote 'live' meeting," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

Meanwhile, risks to Canadian inflation remain tilted to the downside as the economy takes time to adjust to the oil price shock and awaits a boost from fiscal stimulus and the U.S. economic recovery, a senior Bank of Canada official said.

The Canadian dollar CAD=D4 settled at C$1.3213 to the greenback, or 75.68 U.S. cents, weaker than Wednesday's close of C$1.3182, or 75.86 U.S. cents.

That settlement was one pip stronger than the 200-day moving average of C$1.3214, according to Reuters data.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015.   REUTERS/Mark Blinch