TORONTO: The Canadian dollar edged lower against its broadly stronger US counterpart on Friday and bond yields climbed to multi-year highs, as investors weighed Canada’s federal budget and domestic data that showed the jobless rate falling to a record low.
The loonie was trading 0.1% lower at 1.2605 to the greenback, or 79.33 US cents, after trading in a range of 1.2576 to 1.2611.
For the week, the currency was on track to decline 0.7%, losing ground after it notched on Tuesday its strongest intraday level in nearly five months at 1.24.
The decline for the loonie came as the US dollar index strengthened to 100 for the first time in nearly two years, supported by the prospect of a more aggressive pace of Federal Reserve interest rate hikes.
Meanwhile, the price of oil was stable on Friday at about $96 a barrel but remained on course for a second weekly fall after countries announced plans to release crude from their strategic stocks. Oil is one of Canada’s major exports.
Canada’s unemployment rate fell to 5.3% in March, highlighting the tightening of the country’s labor market, with the economy adding a net 72,500 jobs.
With the labour market tight and the inflation outlook worsening, investors expect a rare half-percentage-point rate hike next week from the Bank of Canada.
Canada projected a budget deficit for the current fiscal year that is nearly 10% lower than forecast in a December fiscal update, mostly due to higher revenues.
As deficits narrow, Canada is cutting the amount of debt it issues, including a reduction in long-term bonds.
Still, Canadian government bond yields moved higher across a flatter curve on Friday. The 10-year touched its highest since January 2014 at 2.647% before dipping slightly to 2.637%, up 6.2 basis points on the day.
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