The Canadian dollar CADUSD edged higher against its U.S. counterpart on Friday, adding to its weekly gain, as investors continued to bet on another interest rate hike by the Bank of Canada despite domestic data showing a surprise jobs decline in May.
The loonie was trading 0.2 per cent higher at 1.3320 to the greenback, or 75.08 U.S. cents, after touching its strongest since May 8 at 1.3317.
Canada’s economy shed 17,300 jobs in May, missing forecasts for a gain of 23,200, and the unemployment rate rose for the first time in nine months.
“We continue to expect data releases to look softer as time goes on,” Nathan Janzen, assistant chief economist at Royal Bank of Canada, said in a note. “But it will probably take more downside surprises to upend plans for another rate hike in July.”
Money markets see a roughly 65 per cent chance of a rate hike in July, down only marginally from before the data.
On Wednesday, the BoC hiked its benchmark rate by 25 basis points to a 22-year high of 4.75 per cent, on increasing concerns that inflation could get stuck significantly above its 2 per cent target amid persistently strong economic growth.
The price of oil, one of Canada’s major exports, was down 0.1 per cent at $71.25 a barrel.
Canadian government bond yields were mixed across the curve as U.S. Treasury yields climbed.
The 10-year eased 2.3 basis points to 3.420 per cent, after touching on Thursday its highest intraday level in more than three months at 3.466 per cent.