Canadian dollar takes off on jobs data, bonds fall
By Frank Pingue
TORONTO, Oct 5 (Reuters) - The Canadian dollar raced higher
versus the U.S. currency on Friday and closed above par for the
sixth straight session as strong domestic jobs data all but
eliminated the chance for a Bank of Canada interest rate cut.
Bond prices turned sharply lower after the data and could
not make up any ground as a Bank of Canada survey showed
Canadian companies reported more labor shortages.
The Canadian dollar closed at 98.18 Canadian cents to the
U.S. dollar, or US$1.018, up from Thursday's session close of
99.74 Canadian cents to the U.S. dollar, or US$1.0026.
During the North American session the Canadian currency
rose to 97.86 Canadian cents to the U.S. dollar, or US$1.022,
which marked the currency's highest level since November 1976.
Not only did data from Statistics Canada show employers
hired three times more workers than predicted in September, but
it also showed the unemployment rate in Canada unexpectedly
fell to a 33-year low of 5.9 percent in September.
"It was a very strong number for Canada and continues the
strong run of economic data that we're currently seeing. That
warranted why the Canadian dollar, to a degree, is so strong
against the U.S. dollar," said Gareth Sylvester, senior
currency strategist at HFIX Plc in San Francisco.
"It makes sound sense for an investor to look at the
Canadian dollar as a good investment opportunity."
A Reuters poll conducted after the jobs data showed the
majority of Canada's primary securities dealers forecast the
Bank of Canada will leave interest rates steady in 2007.
The jobs report stole the spotlight and gave the Canadian
dollar an early boost that it never let go, but it was offered
further support when a Bank of Canada Business Outlook Survey
showed companies have had problems keeping up with demand.
The data will likely play a prominent role for the Bank of
Canada, which will announce its next interest rate decision on
Oct. 16. The central bank's overnight rate is at 4.50 percent,
compared with the U.S. federal funds rate of 4.75 percent.
Canadian bond prices took a sharp turn lower given the
upbeat domestic data, while a U.S. jobs report that also topped
expectations did little to reverse the negative sentiment on
"Bond prices didn't really crawl back at all from the
initial reaction to the employment data," said Mark Chandler,
fixed income strategist at RBC Capital Markets.
With no major Canadian data due out next week, Chandler
suggested Canadian bond prices will likely follow the lead of
the bigger U.S. treasuries market.
After that the Bank of Canada rate announcement on Oct. 16,
the central bank's Monetary Policy Report, and consumer price
index data later that week will dictate the tone for Canadian
The two-year bond fell 33 Canadian cents to C$99.90 to
yield 4.300 percent, while the 10-year bond dropped 89 Canadian
cents to C$96.64 to yield 4.431 percent.
The yield spread between the two-year and 10-year bond
moved to 13.1 basis points from 17.3 at the previous close.
The 30-year bond plunged C$1.40 to C$108.76 to yield 4.464
percent. In the United States, the 30-year treasury yielded
The three-month when-issued T-bill yielded 4.03 percent, up
from 3.93 percent at the previous close.