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The Canadian dollar weakened against its U.S. counterpart on Friday, with the currency pulling back from an earlier three-week high after domestic jobs data tempered expectations for a Bank of Canada interest rate hike this month.

At 4 p.m. EDT, the Canadian dollar was trading 0.2 per cent lower at $1.2792 to the greenback, or 78.17 U.S. cents.

The loonie touched its strongest intraday since April 20 at $1.2730. For the week, it rose 0.4 per cent.

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“The weak jobs data took a little steam out of the rally,” said Rahim Madhavji, president at Knightsbridge Foreign Exchange. “It leads to a lesser likelihood of a Bank of Canada rate hike.”

The decline of 1,100 jobs in April was well short of economists’ forecasts for an increase of 17,400. But full-time jobs rose by nearly 29,000 and wage growth accelerated.

Chances of an interest rate hike at the May 30 announcement slipped to 42 per cent from nearly 50 per cent before the jobs data, the overnight index swaps market indicated.

The price of oil, one of Canada’s major exports, fell as it looked likely that U.S. allies would push to maintain a deal with Iran, which could keep that country’s crude exports on global markets.

U.S. crude prices settled 0.9 per cent lower at US$70.70 a barrel.

Still, the loonie is expected to strengthen over the coming year as a clearer outlook for the North American Free Trade Agreement opens the door to more Bank of Canada interest rate hikes, a Reuters poll of currency strategists showed.

Senior American, Canadian and Mexican officials ended a week of talks without a deal to modernize NAFTA, agreeing instead to resume negotiations soon.

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Speculators have cut bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of May 8, net short positions had fallen to 23,861 contracts, the smallest since March, from 27,535 a week earlier.

Canadian government bond prices were higher across a flatter yield curve, with the two-year up 2 Canadian cents to yield 1.967 per cent and the 10-year rising 17 Canadian cents to yield 2.377 per cent.

The 10-year yield had touched its highest intraday since May, 2014 at 2.417 per cent.

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