TORONTO (Reuters) - The Canadian dollar weakened to a three-day low against its U.S. counterpart on Friday as crude oil prices slumped and after stronger-than-expected U.S. jobs data.
U.S. crude CLc1 prices were down 3.68 percent to $36.93 a barrel after Saudi Arabia said it will freeze its oil output only if Iran and other major producers do so. [O/R]
The U.S. dollar extended its gains against the loonie after the release of solid U.S. employment data that could allow a cautious Federal Reserve to gradually raise interest rates this year.
At 9:23 a.m. EDT, the Canadian dollar CAD=D4 was trading at C$1.3101 to the greenback, or 76.33 U.S. cents, much weaker than Thursday’s close of C$1.2987, or 77.00 U.S. cents.
The currency’s strongest level of the session was C$1.2969, while it touched its weakest since at March 29 at C$1.3134.
However, the loonie ended the first quarter 6.5 percent higher than at the end of 2015.
It touched a 5-1/2-month high at C$1.2859 on Thursday after monthly gross domestic product (GDP) data showed the economy grew by a much larger-than-expected 0.6 percent in January, further denting expectations for a for a Bank of Canada rate cut.
The data has led to reassessment by analysts of Canada’s growth outlook.
BMO Capital Markets has “more than doubled” its first-quarter growth projection to an annualized 3.3 percent after the January GDP data, according to a research note on Friday, much faster than the Bank of Canada’s 1 percent estimate.
Canada plans to stick with major investment plans included in last week’s budget, regardless of the level of the Canadian dollar or a pick-up in short-run growth, Finance Minister Bill Morneau said.
Canadian government bond prices were lower across the maturity curve, with the two-year CA2YT=RR price down 0.5 Canadian cents to yield 0.542 percent and the benchmark 10-year CA10YT=RR falling 12 Canadian cents to yield 1.238 percent.
Spreads versus Treasuries were mixed as the U.S. Treasury curve flattened following the U.S. jobs data.
The Canada-U.S. two-year bond spread was 2.6 basis points more negative at -22 basis points. But the 10-year spread narrowed 2.6 basis points to -53.3 basis points, its least negative since Oct. 20, as Treasuries outperformed at the long-end.
The Bank of Canada will release its business outlook survey at 10:30 a.m. EDT.
Reporting by Fergal Smith Editing by W Simon