BLBG: Canada’s Dollar Weakens as Employers Unexpectedly Cut Payrolls
By Chris Fournier
Nov. 6 (Bloomberg) -- Canada’s dollar fell after a report showed the nation’s employers unexpectedly cut jobs in October and a report in Washington showed the U.S. unemployment rate hit a 26-year high, prompting investors to trim bets on higher- yielding assets.
The Canadian currency dropped for a second day as the nation’s unemployment rate rose to 8.6 percent from 8.4 percent in September while employers eliminated 43,200 jobs, Statistics Canada said today in Ottawa. The median estimate in a Bloomberg survey was for employment to rise by 10,000. The U.S. unemployment rate rose to 10.2 percent as American employers cut 190,000 jobs, more than the 175,000 forecast in another survey.
Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 0.9 percent to C$1.0747 per U.S. dollar at 8:55 a.m. in Toronto, from C$1.0651 yesterday. One Canadian dollar buys 93.05 U.S. cents.
The Canadian jobs data “probably will support those concerned that the strong Canadian dollar is constraining the rebound,” said Shaun Osborne, Toronto-based chief currency strategist at Toronto-Dominion Bank, Canada’s second-biggest lender. “It plays into the Bank of Canada’s hands.”
The report may make it easier for the Bank of Canada to fulfill its pledge to keep its benchmark lending rate at a record low until June 2010 to spur growth unless the inflation outlook changes materially. Finance Minister Jim Flaherty said yesterday he still expects weakness in employment data, saying the labor market will recover when economic growth pushes companies to invest again.
‘Cautiously Buying’
The loonie extended declines after the Labor Department issued its data today in Washington.
“The market is cautiously buying U.S. dollars” on the report, said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer.
Canada’s dollar is still headed for its first weekly gain since Oct. 16 as crude oil, the nation’s biggest export, and stocks advanced over the past five days. The Federal Reserve said on Nov. 4 that interest rates will stay “exceptionally low” for an “extended period,” increasing the appeal of riskier assets such as currencies linked to growth.
The loonie touched C$1.0207 on Oct. 15, the strongest level in 15 months, then retreated as officials including Bank of Canada Governor Mark Carney and Flaherty intensified comments that its strength threatens the nation’s economic recovery.
