4 Min Read
By Frank Pingue
TORONTO, March 7 (Reuters) - The Canadian dollar rocketed to its highest level in just over a week versus the U.S. dollar on Friday in one swift move as data showed the domestic economy created five times more jobs than expected in February.
Domestic bond prices stuck higher on the long end of the curve as the jobs report was not expected to alter the Bank of Canada's outlook for the economy, but the short end slipped.
At 8:45 a.m. (1345 GMT), the Canadian dollar was at US$1.0209, valuing a U.S. dollar at 97.95 Canadian cents, up from US$1.0132, or 98.70 Canadian cents, at Thursday's close.
Moments after the data the domestic currency hit US$1.0267, valuing a U.S. dollar at 97.40 Canadian cents, which marked its highest level since Feb. 28.
Triggering the rise in the Canadian dollar was a report from Statistics Canada that showed the economy added 43,300 jobs last month, blowing past market forecasts for a gain of 8,000 amid signs of softer growth.
"You're in an already soft (U.S.) dollar environment and here you get some positive economic news out of Canada which invariably translates very nicely into the view on the Canadian dollar, said Stewart Hall, market strategist at HSBC Canada.
The solid jobs report comes just days after the Bank of Canada lowered its key interest rate by 50 basis points to 3.50 percent and signaled more rate cuts are on the way.
U.S. data released at 8:30 a.m. that showed the economy had its biggest monthly job decline in nearly five years, slashing 63,000 jobs, had little impact on the Canadian dollar.
The commodity-linked Canadian dollar also drew support from oil prices that eased to under $105 a barrel but still stuck near the record high reached in the previous session. And the price for gold, another key Canadian export, also offered the currency a boost as it stayed within sight of $1,000 an ounce.
Canadian bond prices were a touch lower on the short end of the curve given the solid domestic jobs data, but prices on the long end remained higher near pre-data levels as the market did not expect the report to alter the Bank of Canada's outlook for the Canadian economy.
Earlier this week the Bank of Canada said it judges that the balance of risks around its January projection for domestic inflation have clearly shifted to the downside.
"For the most part it doesn't necessarily change what's going to happen in terms of the Bank of Canada's outlook," said Max Clarke, economist at IDEAglobal in New York.
"Unless this trend continues and suddenly the tone changes and the sun rises again in the U.S. and basically the attention changes to something else, it doesn't really have a huge impact on the outlook overall."
The overnight Canadian Libor rate LIBOR01 was 3.6716 percent, up from 3.6650 percent on Thursday.
The two-year bond was down 2 Canadian cents at C$102.88 putting its yield at 2.531 percent. The 10-year bond was up 20 Canadian cents at C$103.65 to yield 3.536 percent.
The yield spread between the two- and 10-year bond was 100.2 basis points, down from 103.0 points at the previous close.
The 30-year bond rose 23 Canadian cents to C$115.88 to yield 4.066 percent. In the United States, the 30-year Treasury yielded 4.468 percent.
The three-month when-issued T-bill yielded 2.55 percent, down from 2.59 percent at the previous close.
(Reporting by Frank Pingue; editing by Scott Anderson)