The Canadian dollar CADUSD strengthened by the most in 12 years against its U.S. counterpart on Friday as oil prices jumped and domestic jobs data bolstered bets for another larger than normal interest rate hike by the Bank of Canada next month.
The Canadian economy added 108,300 jobs in October, easily beating forecasts for 10,000 new jobs, with the blowout gain entirely in full-time work.
Money markets see a 65% chance that the BoC would raise its benchmark interest rate by half a percentage point at its next policy announcement on Dec. 7, up from about 50% before the data.
The United States also added more jobs than anticipated last month but the U.S. dollar did not benefit.
It tumbled against a basket of major currencies while the price of oil, one of Canada’s major exports, surged, as reports China may relax its strict anti-COVID measures boosted investor sentiment.
“Talk of changes to China’s COVID policy brightened the global growth outlook, super-charging commodities,” said Michael Goshko, senior market analyst at Convera Canada.
U.S. crude prices settled 5% higher at $92.61 a barrel, while the Canadian dollar rose 2% to 1.3475 per greenback, or 74.21 U.S. cents, its biggest advance since May 2010.
The currency touched its strongest intraday level since Sept. 23 at 1.3470. For the week, it was up 0.9%.
Canadian government bond yields rose across the curve. The 10-year touched its highest since Oct. 25 at 3.549% before pulling back to 3.520%, up 10.6 basis points on the day.