Canadian dollar rallies after record jobs data

Fri May 7, 2010 8:09am EDT
 
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar shot up one U.S. cent on Friday after a stronger-than-expected jobs report showed a record number of Canadians returned to work in April, adding pressure on the Bank of Canada to raise rates soon.

The currency firmed to a session high of C$1.0338 to the U.S. dollar, or 96.73 U.S. cents, from about C$1.0448, or 95.71 U.S. cents just before the data's release.

Statistics Canada on Friday said the economy added 108,700 jobs in the month, the highest since Statscan began tracking the data in 1976 and exceeding even the most upbeat estimate in a Reuters poll which yielded a median forecast of 25,000 new jobs.

"In more normal times this would be a huge lift for the Canadian dollar. We've seen a bit of a lift for the Canadian dollar, but obviously we're not normal times," said Craig Wright, chief economist at Royal Bank of Canada.

"People are still looking to developments in Europe to take direction and it's the old risk-on and risk-off trade. If people become more comfortable with risk the environment for another run at parity for Canada is there."

At 7:39 a.m. EDT, the Canadian currency was at C$1.0380 to the U.S. dollar, or 96.34 U.S. cents, higher than its close on Thursday of C$1.0523 to the U.S. dollar, or 95.03 U.S. cents.

Yields on overnight index swaps, which trade based on expectations for the central bank's key policy rate, jumped on Friday, showing the market saw tightening as more likely than before the data..

Last month, the Bank of Canada took a first step toward tightening monetary policy by removing a commitment to keep rates at a rock-bottom 0.25 percent until the end of June. Most market players now expect it to raise rates to 0.50 percent on June 1.   Continued...