CAD weekly loss shrinks as rate hike confidence grows

Toronto, July 8 (BNA): The Canadian dollar rose against its US counterpart on Friday, rebounding from a four-week low, as stronger-than-expected domestic jobs data fueled expectations of another rate hike by the Bank of Canada.

Canada’s economy added 59,900 jobs in June, the most since January and well above the median forecast for a gain of 20,000, while the unemployment rate rose to 5.4% from 5.2% as more people looked for work.

Today’s jobs report for June dispels the notion raised last month that the Canadian job market has begun to cool sharply, said Guy Chau Murray, market analyst at Monex Canada Incm.

“Markets are starting to buy with more confidence in our view that the Bank of Canada is set to raise interest rates again next Wednesday.”

Money markets see a 67% chance that the Bank of Canada will raise its benchmark interest rate by 25 basis points at next Wednesday’s policy decision, up from about 60% before the data. The policy rate is currently set at a 22-year high of 4.75%.

The Canadian dollar was trading up 0.7% at 1.3270 per dollar, or 75.36 US cents, after earlier touching its weakest level since June 8 at 1.3387. For the week, the currency is down 0.3%.

Separate data showed that job growth in the United States slowed more than expected in June, which helped limit US bond yields, while the price of oil, one of Canada’s main exports, extended its weekly gains. It closed up 2.9 percent at $73.86 a barrel.

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The Canadian 2-year yield touched its highest level since July 2001 at 4.917% before easing back to 4.775%, up 2.1 basis points on the day.

The gap between the Canadian exchange rate and the US equivalent rate narrowed by 9.1 basis points to a spread of about 16 basis points in favor of US bonds.


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