John Woods
The Canadian dollar closed slightly higher against its U.S. counterpart Friday at the end of a volatile session as a weaker greenback helped send oil prices surging and gold to fresh record highs.
The loonie was up 0.12 of a cent to $1.0445 (U.S.) after earlier going to a fresh 3-1/2 year high of $1.0498.
The big swing reflected the fact that the dollar had surged about 2.5 U.S. cents from March 28 to early Friday morning and "it just got to the point where people figured the Canadian dollar was overdone," said David Watt, senior currency strategist at RBC Capital Markets.
The dollar's fade also came ahead of the Bank of Canada's scheduled announcement on interest rates Tuesday. The central bank is widely expected to leave its key interest rate unchanged at 1 per cent and traders will be interested to see the bank's take on how the higher loonie is affecting the economy.
"The Bank of Canada had expressed concern about persistent dollar strength when it was at parity and we're a few big figures away from there and the market probably got to the point where people thought, we made some good money," added Mr. Watt.
The dollar's performance came amid a weaker than expected March employment report.
Statistics Canada said the economy shed 1,500 jobs last month, the first such drop since last September. Economists had expected an overall gain of about 30,000 jobs in March.
However, the unemployment rate did manage to slip to 7.7 per cent from 7.8 the previous month and there was a surge of 90,000 full-time jobs.
"The employment report made next to no impact on the Canadian dollar," said Doug Porter, deputy chief economist at BMO Capital Markets.
"The big driver at the moment is the U.S. dollar itself retreating against most currencies."
Crude prices surged as fighting in Libya damaged oil fields in the OPEC country. The May contract on the New York Mercantile Exchange rose $2.49 to $112.79 a barrel, its highest level in about 2-1/2 years.
A weak U.S. dollar also helped send the May gold contract on the Nymex up $14.80 to $1,474.10 an ounce.
The May copper contract in New York rose 8 cents to $4.50 a pound.
Analysts say the bout of weakness in the U.S. dollar is likely not going away any time soon.
"The downward pressures on the [greenback]have accelerated recently on the back of loose U.S. monetary policy, a weak fiscal position . . . U.S. dollar bearish market sentiment, rising comfort with ... Europe and rising non-U.S. global interest rates," said a commentary from Scotia Capital.
"We do not think these issues are temporary and expect ongoing weakness in the U.S. dollar this year."