Loonie in Demand after Jobs Data

The Canadian dollar strengthened against the U.S. dollar for the fourth straight session on Friday, jumping to a one-month high after both the Canadian and U.S. economies added more jobs than expected in November. In Canada, government data showed 59,300 net new positions were created last month, the most number of jobs created in eight months. The jobless rate fell to 7.2 percent, the lowest since March, from 7.4 percent, said Statistics Canada.

“It’s a solid report, from head to toe. At least upon first glance, I don’t see any major warts in the data,” said Doug Porter, deputy chief economist at BMO Capital Markets.

“There was a decline in construction and manufacturing jobs, but that’s quibbling, given the fact that almost all the outsized gains were in private sector and full-time jobs.”

Overnight index swaps, which trade based on expectations for the central bank’s key policy rate, showed that traders resumed placing small bets on a rate increase in late 2013 after the employment reports.

In the United States, non-farm employment increased by 146,000 jobs last month, the Labor Department said, defying expectations of a sharp pull back related to superstorm Sandy. However, a drop in the jobless rate to a near-four year low as people gave up the search for work suggested the labor market was still tepid.

“It’s pretty much a one direction bet today for risk assets, and in this case for the Canadian dollar I think you’re probably going to have that general bid-tone sustained for the rest of the day,” said Mazen Issa, a strategist at TD Securities.

At 9:34, the Canadian dollar was trading at C$0.9880 versus the greenback, or $1.0121. This was stronger than the C$0.9925, or $1.0076 it was trading at just before the jobs reports were released and firmer than Thursday’s North American session finish of C$0.9911, or $1.0090. It had strengthened to its best level in a month, touching
C$0.9877, or $1.0125, shortly after the release of the North American data.

“Between this and a decent U.S. number, the dollar’s taken on a bit of strength … I’m not convinced it’s going to have staying power for the currency, but at least probably for today it will be supportive,” said Porter.

Canada’s dollar was also outperforming all other major currencies except the Japanese yen. It touched its strongest
level against the euro in about 2-1/2 weeks. Canadian bond prices fell across the curve, with the two-year bond shedding 7 Canadian cents to yield 1.081 percent, and the benchmark 10-year bond falling 25 Canadian cents to yield 1.721 percent.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments.
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.
Dean Popplewell