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File photo of a Canadian dollar coin.© Mark Blinch / Reuters

Canada's dollar surged the most in three weeks after employers added more jobs in March than economists forecast, fanning speculation the Bank of Canada will refrain from cutting interest rates further.

The loonie gained 0.9 per cent to $1.3021 per U.S. dollar at 10:05 a.m. in Toronto after Statistics Canada reported that employment increased by 40,600 in March after falling 2,300 the previous month. The job gain exceeded all 21 economist forecasts in a Bloomberg News survey with a median estimate of 10,000 new posts. One loonie buys about 76.8 U.S. cents.

"We obviously got solid employment data today," said Bipan Rai, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in Toronto. "It's a good number but there's still some headwinds for the Canadian economy as we move forward."

The loonie has rallied 6.3 per cent against the dollar in 2016 amid signs the economy is weathering a plunge in the price of oil, a key export. The currency slumped 16 per cent in 2015 as Canada's economy struggled to shift toward manufacturing after a commodity rout led the Bank of Canada to cut the key interest rate twice last year. Strong employment numbers decrease the outlook for another cut at the bank's April 13 meeting.

The jobless rate declined to 7.1 per cent from 7.3 per cent.

Speculators are also becoming less bearish on the Canadian currency. Hedge funds and large portfolio managers cut net bearish positions on the currency in the week ended March 29 to the least since June, according to data from the Commodity Futures Trading Commission.

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