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The Canadian dollar strengthened against its U.S. counterpart on Friday after domestic data showing a record increase in jobs caught the foreign exchange market by surprise, pressuring investors who had been short the loonie.

The Canadian economy added 94,100 jobs in November on higher full-time hiring, and the unemployment rate dipped to a new all-time low of 5.6 per cent, Statistics Canada said. Economists had forecast a jobs gain of 11,000.

Meanwhile, U.S. data showed that job growth slowed in November and monthly wages increased less than expected, suggesting some moderation in economic activity.

“I think the market had been pretty heavily leaning toward a continuation of weak (Canadian) data and strong U.S. data when they were thrown a complete curveball,” said Michael Goshko, corporate risk manager at Western Union Business Solutions.

“Given the fact that we had just made a one-and-a-half year high the previous day (for USD-CAD), I think the market was pretty long (U.S.) dollars.”

The most recent data from the U.S. Commodity Futures Trading Commission and Reuters calculations have showed that speculators were adding to bearish bets on the loonie.

At 4 p.m. ET on Friday, the Canadian dollar was trading 0.5 per cent higher at 1.3312 to the greenback, or 75.12 U.S. cents. The currency traded in a range of 1.3285 to 1.3400.

For the week, the loonie was down 0.2 per cent. It hit its lowest in nearly 18 months on Thursday at 1.3445, following an interest rate decision the day before by the Bank of Canada. The central bank, which has hiked five times since July 2017, left its benchmark rate on hold at 1.75 per cent and dampened expectations for additional hikes.

On Thursday, Bank of Canada Governor Stephen Poloz said the economy was weaker than forecast and predicted that lower prices for oil, one of Canada’s major exports, would cut growth.

But the price of oil rallied on Friday after major oil producers agreed to reduce output. U.S. crude oil futures settled 2.2 per cent higher at US$52.61 a barrel.

Canadian government bond prices were mixed across a flatter yield curve, with the two-year down 2 Canadian cents to yield 2.002 per cent and the 10-year rising 18 Canadian cents to yield 2.071 per cent.

The gap between Canada’s two-year yield and its U.S. equivalent narrowed by 5 basis points to a spread of 71.7 basis points in favor of the U.S. bond.

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