TORONTO (Reuters) - The Canadian dollar pared losses against its U.S. counterpart on Friday after data showed steady U.S. jobs growth, but the currency’s move was limited by the lack of impetus for the Federal Reserve to change its accommodative monetary stance.
U.S. job growth grew modestly in January and gains in the prior two months were bigger than initially reported, supporting views the economy of Canada’s main trading partner was on track for a sluggish recovery despite a surprise contraction in output in the final three months of 2012.
“The only surprise was that there was a large revision higher, so I would suspect the move in dollar/Canada has been on that revision higher for the December and November period,” said Camilla Sutton, chief currency strategist at Scotiabank.
She described the report as “mildly positive” for the Canadian dollar, but said the impact was modest because it is unlikely to shift the policy outlook for the U.S. Federal Reserve, which has tied its monetary stance to improvement in the labor market.
At 8:55 a.m. (1355 GMT) the Canadian dollar was trading at C$0.9990 to the greenback, or $1.0010, weaker than Thursday’s North American close of C$0.9973, or $1.0027. It had traded as weak as C$1.0006 before the release of the U.S. non-farm payrolls data for January.
But against the euro, the Canadian dollar weakened to a fresh 13-month low of C$1.3669 as the single currency recorded broad gains on a positive outlook for the euro zone.
It has weakened by more than 5 percent against the surging euro since early January.
“Euro/Canadian dollar is on a tear at the moment and it looks like for all the world it’s going to trade up to C$1.42,” said Shaun Osborne, chief currency strategist at TD Securities.
Scotiabank’s Sutton said traders’ attention will now turn to a European Central Bank policy meeting next week where dovish voices may be heard on the euro’s rise, China data over the weekend, and Canada’s own employment report at the end of next week.
She said the Canadian currency would likely test resistance at C$0.9902 as reallocation away from the currency is somewhat reversed over the next week, with C$1.01 capping any weakness.
While the Canadian economic data calendar on Friday is sparse, other U.S. data on tap in the trading session includes the ISM manufacturing index, construction spending and vehicle sales.
The price of a two-year Canadian government bond rose 2 Canadian cents to yield 1.153 percent, while the benchmark 10-year bond added 14 Canadian cents to yield 1.973 percent.
Editing by W Simon