Canadian dollar falls to nearly three-week low after surprise jobs loss

The Canadian dollar fell to a nearly three-week low against the U.S. dollar on Friday after domestic data showed the economy shed jobs for a third straight month.

The loonie was trading 0.7 per cent lower at 1.4110 per U.S. dollar, or 70.87 US cents, after touching its weakest intraday level since October 19 at 1.4125, according to The Globe and Mail. For the week, the currency was on track to lose nearly 1 per cent, after three straight weeks of gains.

Canada's economy unexpectedly lost 4,700 jobs in October, missing economists' expectations for an increase of 13,600 positions, while the unemployment rate climbed to 6.7 per cent from 6.5 per cent in September, its highest level since April.

In contrast, the U.S. economy added 165,000 jobs in October, significantly exceeding expectations for a gain of 65,000. The unemployment rate held at 4.1 per cent.

Chances the Bank of Canada would tighten in December dipped to 35 per cent from 40 per cent, swap market data showed.

The Canadian central bank unveiled on Thursday a new five-year monetary policy framework with the federal finance ministry, keeping its inflation target unchanged at 2 per cent.

Also on Thursday, Prime Minister Mark Carney's budget showed that he plans to use windfall oil revenue to boost Canada's productivity and build infrastructure while keeping his previous fiscal goals intact.

The currency also remained sensitive to broader market sentiment after a sharp selloff in technology shares revived demand for the U.S. dollar as a safe-haven asset. The Globe and Mail described the equity market move as a selloff in AI stocks.

U.S. crude futures added to their steep weekly decline, trading 0.1 per cent lower at US$90.40 a barrel, after the election losses of US President Donald Trump's Republican Party raised hopes of a de-escalation in the US-Israeli war on Iran. Oil is one of Canada's major exports.

The Canadian 2-year yield was down 3.3 basis points at 3.123 per cent, while it fell 6.8 basis points further below the equivalent US rate to a gap of about 139 basis points.

"The CAD has failed to deliver on the potential for its recent rebound to extend this week," Shaun Osborne and Eric Theoret, FX strategists at Scotiabank, said in a note.

"Elevated equity-market volatility has overshadowed pretty much everything else, although the combination of weak Canadian and strong U.S. jobs data has given the CAD an added nudge lower into the weekend," the strategists said.

Sources

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