The Canadian dollar CADUSD strengthened against its U.S. counterpart on Friday, recouping its earlier decline, as investors raised bets on further tightening by the Bank of Canada after domestic data showed a huge jobs gain in December.
The Canadian economy gained 104,000 jobs last month, far exceeding analysts’ forecasts of 8,000, while the jobless rate unexpectedly declined to 5 per cent, Statistics Canada data showed.
Money markets now see a 75 per cent chance of a quarter-point interest rate hike by the BoC when it next meets to decide on policy on Jan. 25, up from 64 per cent before the data.
The Canadian dollar was trading 0.2 per cent higher at 1.3540 to the greenback, or 73.86 U.S. cents, after trading in a range of 1.3523 to 1.3664. For the week, the currency was on track to edge 0.1 per cent higher.
The gain for the loonie came as separate data showed the U.S. economy maintaining a strong pace of job growth in December but some easing in the annual rate of wage gains.
Adding to support for the loonie, U.S. crude prices were up 2.1 per cent at $75.25 a barrel, clawing back some of this week’s decline. Oil is one of Canada’s major exports.
Canada’s dollar will rally this year, but much of the upswing will have to wait until a period of uncertainty passes for the domestic and global economies following aggressive tightening by central banks in 2022, a Reuters poll forecast.
Canadian government bond yields rose across a flatter curve on Friday. The 2-year climbed 3.9 basis points to 4.079 per cent, while the 10-year was up nearly one basis point at 3.191 per cent.