Briefing highlights
- Loonie on roll as U.S. dollar sideswiped
- Markets at a glance
- Canada’s jobless rate dips
- But thousands of full-time jobs lost
Loonie spikes again
The Canadian dollar raced higher after its U.S. counterpart became "unhinged" overnight, though has settled back somewhat.
Already on a roll after an interest rate hike this week, the loonie has traded as low as 82.4 cents (U.S.) and as high as 82.9 cents, sitting at about 82.3 cents by midday, which was actually down slightly from yesterday's close.
"USD collapsed anew overnight," said Sue Trinh, Royal Bank of Canada's head of Asia foreign exchange strategy in Hong Kong, referring to the greenback by its symbol and citing comments by William Dudley, president of the Federal Reserve Bank of New York.
In the text of a speech to an event in New York, Mr. Dudley said he is "surprised by the persistence" of lower inflation, and sounded less hawkish than he has been.
"The USD came undone … after he failed to explicitly endorse a December rate hike, as he had done previously," Ms. Trinh said in a report titled "USD unhinged."
There's more on the minds of traders, from the wrath of Hurricane Irma to the earthquake that has just hit Mexico.
The Canadian dollar, in turn rallied to levels not seen in more than two years.
That extended the gains since Governor Stephen Poloz and his Bank of Canada colleagues raised their benchmark overnight rate by one-quarter of a percentage point, to 1 per cent, on Wednesday, marking their second increase.
There's much at play here, said Ms. Ozkardeskaya.
"First, the BoC's surprise rate hike handed the market to the bulls," she said.
"Even though the rate hike expectations should temper for next month's meeting, it is possible that the BoC opts for further stimulus unwind sooner rather than later. And this alone is enough to keep the hawks in charge of the market."
And, of course, the selloff of the U.S. dollar amid softer expectations from the Fed.
"The convergence between the Fed and the BoC policy outlook plays in favour of a stronger Canadian dollar," Ms. Ozkardeskaya added. "The significant widening in the CAD/USD yield spread catches important volumes in favour of the loonie. The recovery in oil prices is the cherry on top."
And analysts see it spiking higher still.
In a new forecast late Thursday, Bank of Nova Scotia projected the loonie will rise to 85 cents by early 2018, and 87 cents by mid-year, as the central bank raises its key rate again in December, then twice next year.
"Even more rate increases would be required in 2018 were it not for our expectation that the Canadian dollar will appreciate substantially over the coming year and act to cool growth and inflation somewhat," said Scotiabank chief economist Jean-François Perrault.
"[The loonie forecast] is based on our view that Canadian interest rates will rise more rapidly than expected at present by the market and narrow the rate differential between and the U.S. amidst a continued global move away from the U.S. dollar," he added.
"Oil is not anticipated to have much influence over the loonie through next year given that we forecast a relatively flat profile for crude over this time."
Analysts have said for some time now that the days of the greenback's might are over.
"Until the spring, the dollar tracked real long-term interest rates pretty well, but over the summer it has underperformed," said Kit Juckes, chief foreign exchange strategist at Société Générale.
"In trade-weighted terms, we think further dollar losses from here are an overshoot in the short term, and we look for a small bounce through the end of 2017," he added.
"But the downtrend isn't over."
Read more
- Loonie surges to 82¢ as rate hike catches currencies ‘off guard’
- The death of the U.S. dollar rally (as loonie rises from the grave)
- Barrie McKenna: Bank of Canada hikes rates as economy roars
Markets at a glance
Read more
Unemployment dips
Canada's unemployment is now down to where it sat just before the great meltdown.
The economy churned out 22,000 net new jobs in August, Statistics Canada said today, and the unemployment rate dipped to 6.2 per cent from 6.3 per cent a month earlier.
That matches "the most recent low of October, 2008, the month prior to the 2008-2009 labour market downturn, the agency said.
Don't be deceived by the headline numbers, though.
Full-time employment plunged by 88,000 positions, offset by a jump of 110,000 in the ranks of part-time workers.
Read more