TORONTO (Reuters) - Canada’s dollar firmed to a near one-week high versus the greenback on Thursday after bullish U.S. consumer confidence and private-sector jobs data fired up riskier assets heading into crucial North American employment reports on Friday.
U.S. companies added jobs in October at the fastest pace in eight months, according to payrolls processor Automatic Data Processing, a sign of modest healing in the labor market just days before a presidential election that could hinge on the economy.
“Certainly the ADP was stronger than expected today which I think is rubbing up expectations for non-farm (U.S. payrolls), particularly since ADP has changed their methodology and is now supposed to have a much better correlation with non-farm,” said Camilla Sutton, chief currency strategist at Scotiabank.
“I think the Canadian numbers will end up playing second fiddle to non-farm just because of how important non-farm is right now to Federal Reserve policy.”
Other data on Thursday showed a sharp improvement in consumer confidence and a drop in new claims for jobless benefits, while there were mixed signals regarding the health of U.S. manufacturing.
“(The Canadian dollar) seems to be taking it relatively positively on the back of the significant uptick in risk sentiment, so equities are obviously rallying very strongly and the Canadian dollar is moving ... quite smartly,” said Jeremy Stretch, head of currency strategy at CIBC World Markets in London.
The currency, which often tracks the direction of U.S. equities, followed Wall Street higher though U.S. market participation remained low as investors continued to deal with the aftermath of the massive storm Sandy. .N
The Canadian dollar ended the North American session at C$0.9968, or $1.0032, compared with C$0.9990, or $1.0010, at Wednesday’s close. The currency touched an intraday high of C$0.9960, or $1.0040, its strongest level since October 26.
Stretch said that for the next 24 hours the currency was likely to hold between C$0.9930 and C$1.0020.
The currency felt some pressure after weak Canadian gross domestic product data in the previous session.
Data on Thursday also showed Canadian manufacturing growth slowed for a fourth straight month in October and hit a nine-month low, indicating that the third quarter’s underwhelming economic performance may continue into the end of the year.
Canada likely added very few jobs in October after back-to-back bumper gains in the previous two months, a Reuters poll showed.
In the United States, U.S. job growth likely picked up as well, but not enough to prevent the unemployment rate from rising off a near four-year low.
Sutton noted that a better-than-expected U.S. number could help the U.S. dollar against Canada’s, since it would weigh against the need for an extensive easing program by the Fed, seen as negative for the U.S. dollar.
In that case, however, the Canadian dollar would still benefit on the crosses against other major currencies because of its close ties to the United States, its largest trading partner.
The price of government debt was little changed across the curve with the two-year bond flat to yield 1.074 percent, and the benchmark 10-year bond also unchanged to yield 1.783 percent.
Additional reporting by Alastair Sharp; Editing by Diane Craft