Canadian dollar slapped lower by weak jobs data

Fri Aug 8, 2008 8:58am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar was knocked to its lowest level in nearly a year versus the U.S. dollar on Friday after Canadian jobs data came in worse than expected, in another sign that the economy is slowing down.

Bond prices bounced back from early-morning losses to move higher across the curve as the jobs data likely means that Bank of Canada will stick to the sidelines in the near future, and may even deliver an interest rate cut.

At 8:40 a.m. EDT, the Canadian currency was at C$1.0664 to the U.S. dollar, or 93.77 U.S. cents, down from C$1.0530 to the U.S. dollar, or 94.97 U.S. cents, at Thursday's close.

The bulk of the losses came immediately after data showed the Canadian economy shed 55,000 jobs in July. That was much worse than expectations for a gain of 5,000 jobs and was also the biggest job loss since February 1991.

The Canadian currency slid as far as C$1.0685 to the U.S. dollar, or 93.59 U.S. cents, its lowest level since August 17, from a pre-data level around C$1.0624 to the U.S. dollar, or 94.13 U.S. cents.

"We got a quick reaction to the employment numbers as people added to long U.S. dollar positions," said George Davis, chief technical strategist at RBC Capital Markets.

"But once the reaction to the employment number dried up, given that the market was a little overdone after the overnight rally, we saw prices basically just drift back."

The jobs report represented another in a growing line of figures that have suggested the Canadian economy is starting to slow down after proving resilient earlier this year in the face of a U.S. economic slowdown.   Continued...