The Canadian dollar dipped against a broadly stronger greenback on Friday, reversing from an earlier one-week high, after the release of domestic jobs data that was not firm enough to raise bets for another Bank of Canada interest rate hike next month.
The Canadian economy added 11,200 jobs in October on higher full-time hiring, and the unemployment rate fell to 5.8 per cent, although wage growth was sluggish, Statistics Canada data indicated.
Separate data showed that Canada’s trade deficit in September shrank to C$416 million as imports fell at a faster pace than exports.
“We are still in an environment where the path is towards higher rates,” said Andrew Kelvin, senior rates strategist at TD Securities. “But nothing here suggests the Bank of Canada is behind the curve.”
Last week, the central bank raised its key interest rate by 25 bps to a level of 1.75 per cent, its fifth hike since July 2017. Chances of another hike in December edged lower to 28 per cent from 30 per cent before the data, the overnight index swaps market indicated.
At 3:19 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3102 to the greenback, or 76.32 U.S. cents. The currency, which was unchanged for the week, touched its strongest intraday since Oct. 25 at 1.3050, before the data.
The loonie’s modest decline on Friday came as a stronger-than-expected U.S. jobs gain helped boost the greenback.
“The big dollar began to exert its dominance,” said Michael Goshko, a corporate risk manager at Western Union Business Solutions. “You are also seeing a continuation of the soft commodities story.”
Oil fell as investors worried about oversupply when the United States said it will temporarily spare eight jurisdictions from Iran-related sanctions. U.S. crude oil futures settled 0.9 per cent lower at $63.14 a barrel.
U.S. stocks retreated for the first time in four days after White House economic adviser Larry Kudlow deflated optimism over U.S.-China trade talks.
Canada is a major exporter of commodities, including oil, so its economy could be hurt if the trade dispute between the United States and China hurts the outlook for global growth.
Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 2 cents to yield 2.35 per cent and the 10-year declined 33 cents to yield 2.534 per cent.