Canadian Dollar Drops Most in Two Weeks on Unexpected Jobs Loss – Peter_Catranis

Peter_Catranis
Canada’s dollar lost the most in more than two weeks after employers unexpectedly eliminated jobs in February, reviving speculation the central bank may need to cut interest rates to bolster economic growth.

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The currency, called the loonie, fell for the first time in three days as the U.S., Canada’s biggest trade partner, added more jobs than forecast. The loonie gained for the past two days after the Bank of Canada kept its key interest rate unchanged, citing stronger-than-expected reports on growth and inflation, and said future moves will depend on economic data.

“It wouldn’t surprise me to see another half-percent lower” in the Canadian dollar, Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, said by phone from New York. “It doesn’t juxtapose well against the U.S. number, and it probably gives the Bank of Canada full justification to be very soft with rhetoric now for another three months.”

The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 0.9 percent to C$1.1080 per U.S. dollar at 9:41 a.m. in Toronto. It weakened as much as 1 percent, the biggest intraday drop since Feb. 19. The currency touched C$1.0956 yesterday, the strongest level since Feb. 19. One Canadian dollar buys 90.25 U.S. cents.

Canada’s currency fell versus most of its 16 major peers.

Government bonds fell, pushing yields on Canada’s benchmark 10-year (GCAN10YR) security up as much as six basis points, or 0.06 percentage point, to 2.57 percent. That’s the highest level since Feb. 21.

Government Workers

Employment fell by 7,000, led by a drop in government workers, while the jobless rate was unchanged at 7.0 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 15,000-job increase and an unchanged jobless rate, according to median forecasts. The economy gained 29,400 jobs in January.

In the U.S., Canada’s biggest trade partner, employers added 175,000 jobs last month, the Labor Department reported. That followed a revised 129,000 increase in January that was bigger than initially estimated. The median forecast of economists in a Bloomberg survey called for a 149,000 advance in February. Unemployment rose to 6.7 percent from 6.6 percent as more people entered the labor force and couldn’t find work.

The loonie slid in January to the weakest level since 2009, C$1.1224, after the Bank of Canada in a statement following a policy meeting cited prospects that inflation would stay low, fueling bets the rate might go down.

The central bank, which last met March 5, has held its benchmark interest rate at 1 percent since September 2010 to support the economy.

Good Trading,
Peter Catranis
Derivatives Trading Advisor
Primary Assets Management
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Direct 323-498-5160

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Peter_Catranis

 

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