TORONTO (Reuters) - The Canadian dollar lost ground against its U.S. counterpart on Friday after weak Canadian jobs data underlined the economy’s struggles to cope with an oil shock, while oil prices fell and U.S. wage inflation renewed bets on higher U.S. rates this year.
The sharp move weaker in the Canadian dollar followed strong appreciation earlier in the week, as the currency has broadly won back value since slumping to a 12-year low in mid-January.
Data showing Canada’s economy shed jobs in January somewhat overshadowed encouraging improvement in its trade deficit, including strength in exports.
“A tremendous amount of bad news is priced into the Canadian dollar,” said Adam Button, a currency analyst at ForexLive in Montreal. “Today’s jobs report was a strike against the Canadian economy, but it’s only one strike.”
The Canadian dollar CAD=D4 ended the session trading at C$1.3908 to the greenback, or 71.90 U.S. cents, weaker than Thursday’s official close of C$1.3745, or 72.75 U.S. cents.
It ended last week at C$1.4006, or 71.40 U.S. cents.
The currency’s strongest level of the session was C$1.3710, while its weakest was C$1.3913. On Thursday, the currency touched its strongest since Dec. 11 at C$1.3640.
Speculators have trimmed bearish bets against the Canadian dollar, a week after they hit their highest in five months.
Net short Canadian dollar positions decreased to 52,420 contracts in the week ended Feb. 2 from 66,819 in the prior week, Commodity Futures Trading Commision data showed.
Meanwhile, the greenback got a boost after data showed a pickup in U.S. wages in January, suggesting greater inflation that could give the Federal Reserve more scope to raise U.S. interest rates this year.
Oil prices ended lower in choppy trading, snapping two weeks of gains, as a frenzy of speculation about a possible deal between top producers clashed with concerns about a growing supply glut.
Canadian government bond prices rose across the maturity curve, with the two-year CA2YT=RR price up 2.5 Canadian cents to yield 0.374 percent and the benchmark 10-year CA10YT=RR adding 16 Canadian cents to yield 1.131 percent.
Canada lost 5,700 jobs in January and the unemployment rate edged up to a two-year high of 7.2 percent. Analysts polled by Reuters had forecast a gain of 5,500 positions and for the unemployment rate to stay at 7.1 percent.
The trade deficit narrowed to a smaller-than-expected C$585 million in December from a revised C$1.59 billion in November.
Additional reporting by Fergal Smith; Editing by Nick Zieminski and James Dalgleish