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Canadian dollar.

Jonathan Hayward/The Canadian Press

The Canadian dollar dropped sharply Friday, falling well below 92 cents (U.S.) amid major disappointments on Canadian and U.S. jobs data.

The loonie was well off the worst levels of the session but still closed down 0.42 of a cent at 91.73 cents. Earlier, it fell to 91.36 cents, its lowest level since September, 2009.

Statistics Canada reported that the economy shed 45,900 jobs last month, a major miss as economists had expected it to have created about 14,600 jobs in December. The jobless rate came in at 7.2 per cent, up from 6.9 per cent in November.

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And in the U.S., the Labour Department said the American economy cranked out only 74,000 jobs as opposed to the 200,000 that economists had forecast.

Expectations had been ratcheted up after payroll firm ADP reported Wednesday that the private sector alone created 238,000 jobs last month, while other data Thursday showed a continuing decline in those filing for jobless benefits.

Traders hoped that the U.S. jobs data would provide some direction on how the U.S. Federal Reserve plans to further reduce its monthly purchases of bonds. The Fed said in December that the key stimulus would be reduced to $75-billion a month from $85-billion, starting in January. It said further adjustments would depend on economic performance, particularly the job market.

It's been a brutal week for the loonie, which has fallen about 2.3 cents since last Friday, buffeted by data that showed Canada's trade deficit grew last fall. Another report showed that the U.S. trade deficit dropped 12.9 per cent in November to its lowest level in four years. Imports, including Canadian crude oil, dropped 1.4 per cent.

And the Bank of Canada has turned dovish on interest rates with a hike not expected until next year.

Also, the U.S. dollar has strengthened on speculation about how fast the U.S. Federal Reserve might reduce its massive bond-buying program.

Commodity prices were higher with the February crude contract on the New York Mercantile Exchange ahead $1.06 to $92.72 a barrel.

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March copper gained 4 cents to $3.34 a pound while speculation about Fed intentions pushed February gold bullion up $17.50 to $1,246.90 an ounce.

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