Dollar rattled by weak domestic jobs data

Fri Jul 11, 2008 8:54am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar skidded nearly a cent versus the U.S. dollar on Friday after a weak domestic jobs report all but cemented expectations that the Bank of Canada will leave interest rates steady next week.

Domestic bond prices rose right across the curve as the jobs data suggested the Canadian economy could be in for some tough times given the numerous headwinds it faces.

At 8:35 a.m., the Canadian unit was at C$1.0152 to the U.S. dollar, or 98.50 U.S. cents, down from C$1.0091 to the U.S. dollar, or 99.10 U.S. cents, at Thursday's close.

Earlier, the currency fell to C$1.0179 to the U.S. dollar, or 98.24 U.S. cents, as the latest domestic jobs report showed the economy shed jobs for the first time since December while the unemployment rate rose to its highest in over a year.

"It might be an indication that the economic slowdown is starting to bite a little bit more broadly across Canada here and probably means, at least for now, that the Bank of Canada is probably going to remain on hold," said Shaun Osborne, chief currency strategist at TD Securities.

"We had seen expectations in the market that we would see a decent number and the market was probably long Canadian dollars heading into these figures and got caught by a report that was quite bit weaker than expected."

According to the data the economy lost 5,000 jobs in June, which not only missed expectations for a gain of 10,000 jobs but also marked the biggest monthly decline since August 2006.

Canada's unemployment rate rose to its highest in over a year in June, moving to 6.2 percent from 6.1 percent, which has confirmed a long-awaited slowdown in the labor market after it consistently surprised markets with its strength for most of 2007 and early 2008.   Continued...