Canadian dollar ends weaker on jobs drop; Greek worry

Fri Nov 4, 2011 4:38pm EDT
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By Andrea Hopkins

TORONTO (Reuters) - The Canadian dollar ended weaker on Friday after data showed an unexpected plunge in Canadian employment in October, which boosted the chances of an eventual Bank of Canada interest rate cut.

Renewed doubts about the future of Europe's debt bailout package and the jitters ahead of parliamentary confidence vote for the Greek government also kept the currency and other risk assets on the defensive, overshadowing signs of improvement in Friday's U.S. jobs report for October.

"The big driver has been that Canadian jobs report ... (but) in terms of event risk today, we're still waiting for that Greek confidence vote," said Stewart Hall, senior currency strategist at Royal Bank of Canada.

In October, Canadian employers cut almost all the jobs gained in September as a sluggish economy led to layoffs in the manufacturing and construction sectors.

"It is definitely suggesting the economy is slowing," said Sheryl King, head of Canadian economics at Bank of America-Merrill Lynch. "I don't think (the jobs report) is enough to get the Bank of Canada to cut (rates) at this point, but one or two more of these and there is a strong possibility that the bank could start reducing interest rates."

In the wake of the surprise job losses, the Canadian dollar fell more than a cent to a session low of C$1.0229 to the U.S. dollar, or 97.76 U.S. cents, its weakest point in more than two weeks, before regaining a little ground.

It ended the North American session at C$1.0167 to the U.S. dollar, or 98.36 U.S. cents, below Thursday's North American close of C$1.0081 to the U.S. dollar, or 99.20 U.S. cents.

Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that traders were pricing in a higher chance of a rate cut next year.   Continued...