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Canadian dollar hits three-week low as jobs miss adds to rate cut bets

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11/08/2019 | 04:07pm EST
FILE PHOTO: A Canadian dollar coin, commonly known as the

The Canadian dollar weakened to a three-week low against its U.S. counterpart on Friday as data showing a surprise decline in domestic jobs added to pressure on the currency since the Bank of Canada shifted to a more dovish stance.

Canada lost 1,800 jobs in October after robust job growth over the previous two months, data from Statistics Canada showed. Analysts had expected jobs to rise by 15,900.

"USD-CAD was already drifting higher off the lows we saw in the last couple of weeks because of concern around changing sentiment and the Bank of Canada," said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.

Last week, the Bank of Canada left the door open to an interest rate cut as it expressed concern about trade uncertainty.

Chances of an easing at the central bank's next meeting in December rose to about 25% from 15% before the jobs data, the overnight index swaps market indicated.

The loonie could weaken by "another penny, penny-and-a-half" to a level that would then attract buying of the currency by Canadian corporates, Schruder said.

Housing data also showed declines.

Statistics Canada said that the value of Canadian building permits dropped by a larger-than-expected 6.5% in September to C$8.3 billion, while data from the Canadian Mortgage and Housing Corporation (CMHC) showed that the seasonally adjusted annualized rate of housing starts fell to 201,973 units in October from a revised 221,135 units in September.

At 3:30 p.m. (2030 GMT), the Canadian dollar <CAD=D4> was trading 0.4% lower at 1.3228 to the greenback, or 75.60 U.S. cents. The currency touched its weakest intraday level since Oct. 16 at 1.3237.

For the week, the loonie was down 0.7%.

The currency's decline came as U.S. President Donald Trump said he had not agreed to roll back tariffs on Chinese goods, denting investor optimism that the United States and China would reach a trade deal.

Canada is a major exporter of commodities, including oil, so its economy could be hurt by a prolonged trade war. U.S. crude oil futures clawed back its earlier decline to settled 0.2% higher at $57.24 a barrel.

Canadian government bond prices were higher across the yield curve, with the two-year up 8.5 Canadian cents to yield 1.584% and the 10-year rising 32 Canadian cents to yield 1.581%.

On Thursday, the 10-year yield touched its highest intraday level since May 24 at 1.650%.

By Fergal Smith

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) -0.10% 0.90463 Delayed Quote.-5.72%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) 0.02% 1.72348 Delayed Quote.-1.41%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.31% 81.606 Delayed Quote.1.70%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) 0.35% 0.74566 Delayed Quote.3.85%
CRB COMMODITY INDEX 0.10% 195.01 End-of-day quote.0.00%
LONDON BRENT OIL 0.74% 62.94 Delayed Quote.12.23%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) 0.06% 0.85444 Delayed Quote.-6.90%
WTI 1.39% 57.69 Delayed Quote.25.31%
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