By Solarina Ho
TORONTO, Oct 9 (Reuters) – The Canadian dollar rallied
against its U.S. counterpart on Friday, at one point touching
its strongest level since late July, as investors took on more
risk, relieved by indications of a more dovish U.S. Federal
Reserve.
The currency surged to a session high immediately after data
showed the Canadian economy created 12,100 jobs last month, but
quickly pared gains as market participants digested the report,
which included an unexpected rise in the unemployment rate to
7.1 percent.
“On the surface, it seemed like we beat estimates. … A lot
of full time jobs were lost, and part time jobs gained. So
essentially not really strong,” said Hosen Marjaee, senior
managing director of Canadian fixed income at Manulife Asset
Management, noting that the loonie eventually recouped some of
the lost ground.
The Canadian dollar ended the session at C$1.2937
to the greenback, or 77.30 U.S. cents, stronger than the Bank of
Canada’s official close of C$1.3017, or 76.82 U.S. cents on
Thursday.
The loonie, which has gained some 1.6 percent on the week,
traded as strong as C$1.2901, a level not seen in nearly 2-1/2
months. It has advanced in seven of the last eight sessions,
after slumping to C$1.3457, its weakest level in 11 years.
Global markets rallied after minutes from the Fed’s
September policy meeting indicated the U.S. central bank was in
no hurry to hike interest rates, given uncertainty in the global
economy.
“One of the big factors over the last week has been the
return to risk across the board,” said Margaee, noting in
particular the 10 percent rally in the price of crude, a major
Canadian export, since the beginning of October.
The loonie has closely tracked volatile crude prices over
the last year.
Over the longer term, however, the Canadian dollar is not
expected to strengthen much further, given the softening global
economy, and an expected eventual rate hike by the Fed.
“I don’t think it has a lot of room. … The euphoria may
last a bit longer, maybe a few more days, one or two more
cents,” said Margaee.
Canadian government bond prices were mixed across the
maturity curve, with longer term bonds lower. The two-year
price fell 1 Canadian cent to yield 0.560 percent and
the benchmark 10-year slipped 13 Canadian cents to
yield 1.519 percent.
The Canada-U.S. two-year bond spread was -8.1 basis points,
while the 10-year spread was -57.1 basis points.
(Editing by Jeffrey Benkoe and Richard Chang)
