Canadian dollar weakens to a six-month low as risk appetite dips

Fri Oct 7, 2016 4:50pm EDT
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to a six-month low against its U.S. counterpart on Friday as volatility in the foreign exchange market and lower oil prices offset stronger-than-expected domestic jobs data.

Canada's economy created 67,200 jobs in September, far more than expected, though that was fueled by the biggest increase in self-employed workers in more than seven years.

"I don't think on its own it's warranted for the Canadian dollar to be where it is," said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management, who pointed to the strength of recent domestic data.

Canadian companies' hiring and investment intentions improved modestly in the third quarter, while resource firms believe the sector may be bottoming out after prolonged weakness, the Bank of Canada said.

The so-called "flash crash" that knocked sterling to a 31-year low and increased tensions between Russia and the United States over Syria have triggered demand for safe-haven currencies such as the Japanese yen JPY= and the U.S. dollar .DXY at the expense of the loonie, Marjaee said.

U.S. employment growth unexpectedly slowed for the third straight month in September.

Still, the U.S. jobs data was not so weak as to derail a potential interest rate hike by the Federal Reserve in December, said Marjaee.

The Canadian dollar CAD=D4 ended at C$1.3285 to the greenback, or 75.27 U.S. cents, weaker than Thursday's close of C$1.3213, or 75.68 U.S. cents.   Continued...

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