Canadian dollar pulls back from two-year high as investors weigh jobs data

TORONTO (Reuters) - The Canadian dollar was little changed on Friday against its broadly weaker U.S. counterpart, with the currency pulling back from an earlier 2-year high as investors weighed domestic jobs data.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

Canada’s economy added 22,200 jobs in August, mostly in part-time employment, Statistics Canada said. The jobless rate fell to 6.2 percent from 6.3 percent in July, matching the most recent low of October 2008.

“The composition of the job gains was mixed and in my opinion poor on balance,” said Derek Holt, head of capital markets economics at Scotiabank.

Still, a pickup in wage growth could keep the door open to further interest rate increases from the Bank of Canada after the central bank hiked on Wednesday for the second time in three months.

“I’d put the emphasis upon wages and I think we are on the path to 2.5 to 3 percent wage growth off into next year,” Holt said.

Chances of a rate hike next month dipped to around 30 percent from 35 percent before the data, the overnight index swaps market indicated. BOCWATCH

At 9:08 a.m. ET (1308 GMT), the Canadian dollar CAD=D4 was trading nearly unchanged at C$1.2115 to the greenback, or 82.54 U.S. cents.

The currency’s weakest level of the session was C$1.2134, while it touched its strongest since May 2015 at C$1.2063.

The U.S. dollar .DXY lost ground against a basket of major currencies, as a Reuters report that European Central Bank officials were in broad agreement that their next step would be to reduce their bond purchases boosted the euro.

Prices of oil, one of Canada’s major exports, steadied after almost a week of sharp gains as Hurricane Irma, one of the most powerful storms in a century, drove toward Florida after tearing through the Caribbean. Its predecessor, Harvey, had shut a quarter of U.S. refineries and 8 percent of U.S. oil production.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR price down 5.5 Canadian cents to yield 1.506 percent and the 10-year CA10YT=RR falling 26 Canadian cents to yield 1.969 percent.

The 2-year yield touched its highest intraday since July 2011 at 1.525 percent, while the gap between the 10-year yield and its U.S. equivalent narrowed by 3.5 basis points to a spread of -8.9 basis points, its narrowest since October 2013.

Reporting by Fergal Smith; Editing by Meredith Mazzilli