TORONTO (Reuters) - The Canadian dollar ended weaker against its U.S. counterpart on Thursday after briefly touching its strongest level in more than two months, with traders looking to Friday’s key domestic jobs report to set direction for the currency.
The Canadian currency took its direction from weaker prices for some commodities and a pullback in global stock markets, which slipped from recent record levels. <MKTS/GLOB>
“We don’t have much in the way of domestic drivers today. The equity markets began to lose a bit of their steam, that was the primary factor,” said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital.
“We’ve come a long way really, and we have a pretty important release tomorrow.”
The Canadian dollar ended the North American session at C$1.0075, or 99.26 U.S. cents, nearly half a cent weaker than Wednesday’s close of C$1.0033, or 99.67 U.S. cents.
The currency earlier in the session hit C$1.0014 to the U.S. dollar, its strongest level in nearly three months. The Canadian dollar had gained some 2-1/2 cents on the U.S. dollar since late April before the afternoon retrenchment.
Over the longer term, the Canadian dollar is expected to weaken against the greenback in the year ahead, according to a Reuters poll published on Wednesday. Forecasters cited concern about the economy’s slow rate of growth compared with that of the United States. <CAD/POLL>
Chandler said focus is now on the Canadian employment report due out on Friday, which is expected to show the economy added 15,000 jobs in April, according to a Reuters survey of analysts, after a steep decline notched in March.
But he said even a strong report may not be enough to push the currency to fresh highs, given that the Bank of Canada has long said no rate hikes are on the immediate horizon.
“We’re in a bit of a limbo situation with the Bank of Canada so it is really not about monetary policy. It’s just about risk-on, risk-off and whether generally North America is going to look better in Q2,” Chandler said.
“We’ve had a good run of better data that had people believing Q2 might be a bit of a pleasant surprise compared to what they had thought. But a weaker number in the employment data may take some shine off.”
Prices for Canadian government bonds were mixed. The two-year bond was unchanged to yield 0.976 percent, while the benchmark 10-year bond rose 5 Canadian cents to yield 1.806 percent.
Editing by Jeffrey Hodgson; and Peter Galloway