TORONTO (Reuters) - The Canadian dollar fell to its weakest level against the U.S. dollar in 21 months on Friday after North American jobs data showed Canada losing a modest 400 jobs and the U.S. labor market steadily improving.
U.S. jobs growth was stronger than expected last month, with employers adding 195,000 new jobs and an upward revision for both April and May. The numbers added to expectations that the Federal Reserve may be ready to scale back its bond purchases as early as September.
“It’s still a U.S. dollar story. It has been for weeks if not months, and today’s U.S. job report was essentially a home-run,” said Rahim Madhavji, president at commercial foreign exchange dealing firm Knightsbridge Foreign Exchange.
“Basically what that means is we’re heading toward the reduction of stimulus.”
The Canadian dollar, which was mostly outperforming other currencies, finished its North American session at C$1.0567 versus the rallying greenback, or 94.63 U.S. cents, weaker than immediately before the data was released and off Thursday’s finish at C$1.0521 to the U.S. dollar, or 95.05 U.S. cents. Earlier, it had traded as soft as C$1.0609, or 94.26 U.S. cents, its weakest level since early October 2011.
In Canada, market analysts polled by Reuters had predicted a loss of 2,500 jobs following May’s huge 95,000 new positions, the second highest increase on record.
“This is about as close to expectations as we’ve seen in quite some time for Canada’s employment report - no big surprise at all that we had basically a flat month after the blowout in May,” said Doug Porter, chief economist at BMO Capital Markets.
Prices for Canadian government debt fell sharply across the maturity curve. The two-year bond was down 9.5 Canadian cents to yield 1.229 percent. The benchmark 10-year bond gave back C$1.08 to yield 2.546 percent, its highest yield since early August 2011.
Reporting by Solarina Ho; Editing by Chizu Nomiyama