TORONTO (Reuters) - The Canadian dollar rose 1 percent against the U.S. dollar on Friday, as equity markets made healthy gains, putting a positive spin on the global growth outlook and giving support to commodity-based currencies.
Bond prices rose across the curve after a weak U.S. jobs report supported the idea of more interest rate cuts by the U.S. Federal Reserve.
The Canadian currency closed at US$1.0060, valuing a U.S. dollar at 99.40 Canadian cents, according to the Bank of Canada, up from C$1.0038 to the U.S. dollar, or 99.62 U.S. cents, at Thursday’s close.
The currency ended the week up 1.3 percent against the greenback.
“I think the story right now is about global growth, and equities markets being up helps that story,” said Camilla Sutton, currency analyst at Scotia Capital.
The markets have been very volatile as of late, and currency traders have been looking to the stock markets as a barometer on the prospects for global growth.
When those prospects rise, so too does the outlook for the commodities that countries like Canada, Australia and New Zealand produce. The currencies of all three countries were up about 1 percent on the day.
Microsoft Corp’s (MSFT.O) $44.6 billion dollar bid for Yahoo Inc YHOO.O helped lift North American stock markets.
It also helped turn some attention away from a U.S. jobs report that came in well below expectations.
Nonfarm payrolls in the United States dropped by 17,000 in January, well below expectations for a rise of 80,000.
But the report also included a revision that raised December’s new-job total to 82,000 from 18,000.
Bond prices rallied along with U.S. Treasuries, as the U.S. job numbers pointed to more Fed rate cuts.
“The markets were poised for a relatively positive number,” said Carlos Leitao, chief economist at Laurentian Bank of Canada.
“No one expected huge job creation, but most people expected something in the range of 50,000 to 80,000 new jobs and it turned out to be negative, so that’s reopened the fears of a recession.”
The U.S. data overshadowed a Canadian report that showed producer prices rose more than expected in December, while raw materials prices rose 0.2 percent, below the forecast 0.5 percent gain.
The two-year bond rose 7 Canadian cents to C$101.95 to yield 3.136 percent. The 10-year bond rose 45 Canadian cents to C$100.40 to yield 3.819 percent.
The yield spread between the two- and 10-year bond was 68.3 basis points, down from 69.8 points at the previous close.
The 30-year bond climbed 84 Canadian cents to C$114.59 to yield 4.136 percent. In the United States, the 30-year Treasury yielded 4.308 percent.
The three-month when-issued T-bill yielded 3.36 percent, down from 3.39 percent at the previous close.