TORONTO (Reuters) - Canada’s dollar weakened against the U.S. currency on Friday, hurt by fears about global growth and Europe’s debt crisis, with data showing the Canadian economy created fewer jobs than expected and a surprise trade deficit signaling tepid domestic demand.
Canada’s unemployment rate held steady in May as the economy created a negligible 7,700 jobs, snapping a two-month hiring spree that yielded the biggest employment gains in three decades.
“While the details are slightly disappointing, the fact that Canada is still churning out job gains is the big story here, so I don’t see why this would have any lasting impact on the Canadian dollar,” said Doug Porter, deputy chief economist at BMO Capital Markets.
Porter said he thought the one month of data would not affect the longer-term outlook for the Bank of Canada’s monetary policy.
Trade data released with the jobs number did nothing to support the currency. The report showed a surprise trade deficit, Canada’s first in six months.
Following the data releases, the currency briefly touched a session low of C$1.0358.
But by 9:48 a.m. EDT (1348 GMT) it was trading at C$1.0337, or 96.74 U.S. cents, compared with around C$1.0339 heading into the report.
The currency was weaker than Thursday’s close at C$1.0279 or 97.29 U.S. cents.
Since data last week showed weak U.S. job creation in May, there has been rising speculation of more stimulus measures from global central banks. The Bank of Canada joined the European Central Bank in holding rates on Tuesday, but the tone of its statement signaled that its next move would be a rate hike.
The lack of a clear signal on Thursday from U.S. Federal Reserve Chairman Ben Bernanke that the central bank’s June 19-20 meeting would bring in a new round of quantitative easing overshadowed what had been a positive reaction in world markets to a surprise Chinese interest rate cut.
Markets also worried about how Madrid can solve the crisis at many of its banks caused by a property crash and recession, a job complicated by Fitch’s announcement on Thursday that it cut Spain’s sovereign credit rating by three notches to BBB from A.
European Union and German sources said Spain was set to request European aid for its banks this weekend to forestall worsening market turmoil, making it the fourth and largest country to seek assistance since the euro zone debt crisis began.
Canadian bond prices were mostly higher. The two-year bond rose 8 Canadian cents to yield 1.011 percent, while the benchmark 10-year bond climbed 67 Canadian cents to yield 1.744 percent.
Editing by Jeffrey Hodgson