(Adds analyst quote and details throughout; updates prices)
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Canadian dollar strengthens 1% against greenback
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Touches strongest level since Dec. 5 at 1.3434
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Canada’s economy adds 104,000 jobs in December
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Canadian bonds track rally in U.S. Treasuries
TORONTO, Jan 6 (Reuters) – The Canadian dollar
strengthened to a one-month high against its U.S. counterpart on
Friday as investors raised bets on further tightening by the
Bank of Canada after domestic data showed a huge jobs gain in
December.
The Canadian economy gained 104,000 jobs last month, far
exceeding analysts’ forecasts of a rise of 8,000, while the
jobless rate unexpectedly declined to 5%, Statistics Canada data
showed.
“This should help the loonie outperform among the G10
ex-dollar,” said Simon Harvey, head of FX analysis for Monex
Europe and Monex Canada.
“The outturn of today’s jobs data is likely to keep the
market base case firm around another 25-basis-point hike at the
end of the month.”
Money markets now see a roughly 75% chance of a
quarter-percentage-point rate hike by the BoC when it next meets
to decide on policy on Jan. 25, up from 64% before the release
of the jobs data.
The Canadian dollar was trading 1% higher at 1.3434
to the greenback, or 74.44 U.S. cents, its strongest level since
Dec. 5. For the week, it was up 0.9%, its third straight weekly
advance.
The currency will rally this year, but much of the upswing
will have to wait until a period of uncertainty passes for the
domestic and global economies following aggressive tightening by
central banks in 2022, a Reuters poll forecast.
The loonie’s rise coincided with weakness in the U.S.
dollar, which fell against a basket of currencies after U.S.
data showed an easing of wage gains in December. The U.S. jobs
data triggered a rally on Wall Street and in U.S. Treasury bonds
that spilled over into the Canadian government bond market.
Canada’s 10-year yield fell 8.7 basis points to
3.096%. Still, it was trading about 7 basis points closer to the
equivalent U.S. rate at a gap of 46.8 basis points in favor of
the U.S. bond.
(Reporting by Fergal Smith; Editing by Andrew Heavens and Paul
Simao)
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