Canada’s dollar strengthened versus its U.S. counterpart after employment climbed in April almost six times faster than economists forecast, buoying the argument for the central bank to raise interest rates.
The currency reversed an earlier decline that took it to almost a three-month low. It rose against all of its 16 most- traded peers tracked by Bloomberg after Statistics Canada said payrolls grew over the past two months by the most in 30 years.
“This is a pretty strong report,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank. “This is probably going to get the market thinking about Bank of Canada rate-hiking coming through sooner rather than later.”
Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 0.4 percent to 99.83 cents per U.S. dollar at 9:29 a.m. in Toronto, gaining above parity. Earlier it weakened as much as 0.3 percent. One Canadian dollar buys $1.0017.
The loonie weakened earlier as stocks and commodities fell after JPMorgan Chase & Co. reported a $2 billion trading loss and China’s industrial output unexpectedly slowed last month, increasing the least since 2009. Greek political leaders headed into a fifth day of talks on forming a new government after voters in weekend elections revolted against austerity measures, fueling bets Europe’s debt crisis will worsen.
Jobs Growth
The currency reversed losses after Statistics Canada reported that employment rose by 58,200 jobs following a March jump of 82,300 that was the biggest since September 2008. The labor force grew by 72,500, lifting the unemployment rate to 7.3 percent from 7.2 percent.
Economists surveyed by Bloomberg News projected a gain of 10,000 jobs and a 7.3 percent jobless rate, according to the median forecasts.
“A strong jobs report continues to play into Canada as a good place to put your money on a relative basis and underscores the idea that the Bank of Canada is likely to maintain its bias for less accommodation,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, said yesterday in a phone interview. “Still, the global risk atmosphere is the primary driver in the currency.”
The likelihood the central bank will increase borrowing costs by September dropped since data on May 4 showed employers in the U.S., the nation’s biggest trade partner, added the fewest workers in six months during April. Chances had surged earlier after policy makers on April 17 suggested rates would go up sooner than economists expected as slack in the economy evaporated.
Rate Wagers
Odds of an increase were 43 percent yesterday, compared with 75 percent on April 27, according to Bloomberg calculations on overnight index swaps.
The Bank of Canada has held its benchmark overnight lending rate target at 1 percent since September 2010.
Shorter-term Canadian government bonds fell today, pushing yields on two-year securities up seven basis points, or 0.07 percentage point, to 1.31 percent.
The loonie gained even as crude oil, Canada’s biggest export, fell to almost the lowest level this year. June futures dropped 1.3 percent to $95.87 a barrel in New York after touching $95.17 on May 9, the weakest since December. The MSCI World Index of stocks declined 0.4 percent.
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net.
Source : bloomberg.com
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