TORONTO (Reuters) - Canada’s dollar was little changed against its U.S. counterpart on Thursday and traded in a narrow range as the market looked ahead to a key domestic jobs report for more signs on the state of the economic recovery.
The currency’s performance was largely muted compared to a selloff in the previous session. It was seen pressured by ongoing worries about the stability of the euro zone, most recently with Greece’s political impasse, but it was also supported by a modest advance in global equities after recent weakness and better U.S. jobs data..N
New U.S. claims for unemployment benefits edged downward last week, according to government data on Thursday, which could ease concerns the labor market was deteriorating after April’s weak employment growth.
“Even the tiny improvement in initial jobless claims is encouraging especially given the mediocre employment report we saw for the U.S. in April,” said Doug Porter, deputy chief economist at BMO Capital Markets.
“There was a sense that the U.S. economy was struggling again and to see any improvement in the jobs front is a check mark in the plus column,” he said.
All that helped the Canadian currency climb as high as C$0.9977 versus the U.S. dollar, or $1.0023. The currency finished the session at C$1.0017 versus the U.S. dollar, or 99.83 U.S. cents, down slightly from Wednesday’s finish at C$1.0009 against the U.S. dollar, or 99.91 U.S. cents.
The focus going forward is Friday’s Canadian employment data, said Charles St-Arnaud, economist and currency strategist at Nomura Securities in New York.
Canada will be fortunate if it registered much of an employment increase in April after March’s outsized gain of 82,300 jobs, according to a Reuters poll of analysts.
Data out on May 11 is forecast to show a much smaller 7,000 gain, and the unemployment rate edging back up a tick to 7.3 percent, after having fallen in March to 7.2 percent from 7.4 percent.
Canada’s currency has been supported since the latter half of April on ramped-up expectations of interest rate hikes by the Bank of Canada. The central bank surprised investors with a more positive domestic economic outlook and an explicit warning that it may have to start raising rates again.
But the market is still looking for clues on exactly when the central bank might hike rates.
“If you get another strong employment number tomorrow, it validates the idea that the Bank of Canada will (raise rates) this year,” said St-Arnaud.
“On flip side, there’s a lot of people that are getting a bit worried that maybe the strong increase we’ve seen in March was more to do with special factors and we could see a reversal of those factors in April,” he added.
The report will also be scrutinized after recent data showed Canada’s economy unexpectedly shrank in February, disappointing markets and cooling talk that the country’s central bank could start raising interest rates in the near future.
The currency’s performance was mixed against its G10 currency cousins. It outperformed the U.S. dollar and Japanese yen, but underperformed the New Zealand and Australian dollars.
Canadian bond prices were mostly lower across the curve, with Canada’s 2-year bond down 5 Canadian cents to yield 1.249 percent, while the benchmark 10-year bond sank 17 Canadian cents to yield 2.003 percent.
Editing by Gary Crosse