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The Canadian dollar CADUSD edged higher against its U.S. counterpart on Friday as stronger-than-expected domestic data supported expectations for the start of Bank of Canada interest rate hikes in the coming months.

The loonie was 0.2 per cent higher at 1.2709 to the greenback, or 78.68 U.S. cents, after trading in a range of 1.2681 to 1.2731. For the week, the currency was on track to decline 0.6 per cent.

The Canadian economy added 54,700 jobs in December, twice as many as expected, and the unemployment rate hit a 22-month low, though the survey was taken before the Omicron coronavirus variant began spreading.

Canada’s central bank has signaled it could begin hiking interest rates in April but money markets are expecting an earlier move.

Meanwhile, U.S. data showed that employment increased less than expected in December amid worker shortages.

The Canadian dollar is expected to strengthen over the coming year as global economic recovery from the COVID-19 crisis continues but gains for the currency could be kept in check by Federal Reserve interest rate hikes, a Reuters poll showed.

U.S. crude prices were down 0.1 per cent at $79.35 a barrel on Friday but holding on to much of this week’s rally. Unrest in Kazakhstan and outages in Libya have supported oil, one of Canada’s major exports, in recent days.

Canadian government bond yields rose across the curve. The 10-year touched its highest since Nov. 26 at 1.740 per cent before dipping to 1.710 per cent, up 1.2 basis points on the day.

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