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Forex Market News - Canadian dollar closes at lowest level in a year
By John McCrank
TORONTO (Reuters) - The Canadian dollar closed at its
lowest level in nearly a year versus a rallying U.S. dollar on
Friday after data showed Canada shed more jobs in July than at
any other time since the recession in 1991.
Bond prices rallied as the weak jobs data raised the odds
the Bank of Canada will deliver at least one interest rate cut
before the end of the year.
The Canadian dollar closed at C$1.0674 to the U.S. dollar,
or 93.69 U.S. cents, down from C$1.0530 to the U.S. dollar, or
94.97 U.S. cents, at Thursday's close.
For the week, the currency closed down 3.8 percent. During
the session, it hit a low of C$1.0696, its lowest level since
August 17, 2007.
Most of the day's losses came at the open of the North
American session after data showed Canada lost 55,000 jobs in
July, far below expectations for a gain of 5,000 jobs.
The Canadian dollar had already been under pressure due to
weakening commodity prices and a rallying greenback.
Canada is a major exporter of oil and other key
commodities, many of which have seen sharp corrections in
While the Canadian dollar sold off well over 1 percent
against the greenback, it could have been worse, said Shaun
Osborne, chief currency strategist at TD Securities.
"The fact of the matter is that the Canadian dollar is not
the worst performing currency of the day," he said.
"In terms of the G10 currencies, it's actually one of the
The greenback was higher nearly right across the board,
making gains of 2 percent or more against the currencies of
Norway, Sweden, Australia, New Zealand and the European Union.
As data from most developed global economies shows a
slowing trend, the United States appears to be at the tail end
of its economic slump.
Futures markets are starting to price in interest rate cuts
in much of the developed world, while the next interest rate
move by the U.S. Federal Reserve is expected to be a hike, and
that is giving a boost to the greenback.
The futures market is now pricing in two 25 basis point
rate cuts, to 2.50 percent, by the Bank of Canada by the end of
Osborne said the U.S. dollar could drift a bit lower next
week, but modest losses will likely be seen as a buying
opportunity, leading to more greenback strength.
"It would suggest technically that over the next few months
the potential to move up to the C$1.08 to C$1.10 range for
BOND PRICES RALLY
Bond prices rallied as the job loss numbers convinced
dealers to start pricing in Bank of Canada interest rate cuts.
"You've got two-years around 2.72 (percent), which is more
than a quarter below the Bank of Canada rate, so that gives you
an idea of what the market thinks the Bank of Canada is going
to be doing going forward," said Levente Mady, fixed income
strategist at MF Global Canada in Vancouver.
Two-year bond yields reflect bond market expectations for
the central bank's overnight rate.
The two-year bond rose 1 Canadian cent to C$101.81 to yield
2.712 percent. The 10-year bond climbed 27 Canadian cents to
C$105.24 to yield 3.610 percent.
The yield spread between the two-year and 10-year bond was
109 basis points, up from 103 basis points.
The 30-year bond jumped 39 Canadian cents to C$116.04 for a
yield of 4.051 percent. In the United States, the 30-year
treasury yielded 4.544 percent.
The three-month when-issued T-bill yielded 2.48 percent,
down from 2.53 percent at the previous close.
(Editing by Rob Wilson)
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