TORONTO: The Canadian dollar ended slightly weaker against the greenback on Monday, still smarting from Friday's grim employment data, but hit a four-and-a-half-year high versus the yen following the Bank of Japan's aggressive stimulus policy.
The loonie, as the currency is colloquially known, has gained more than 6 percent against the yen since Thursday, when the Bank of Japan unleashed the world's most intense burst of monetary stimulus, promising to inject about $1.4 trillion into the country's economy in less than two years, a radical gamble that sent the Japanese currency tumbling.
The yen plunged to near four-year lows against the US dollar and three-year lows against the euro on Monday.
"Most of the majors, including the Canadian dollar, are sticking to themes developed late last week," said Greg Moore, a foreign exchange strategist at TD Securities.
On Friday, disappointing employment data in Canada and the United States on Friday sent markets tumbling on concerns the North American economic recovery may be flagging.
The Canadian dollar ended the session trading at C$1.0173 versus the US dollar, or 98.30 US cents, higher than Friday's North American close at $1.0164, or 98.39 US cents.
Canada's economy shed 54,500 jobs in March, more than wiping out the previous month's big gain. Analysts had forecast an increase of 8,500 jobs.
Canadian housing data on Tuesday and Thursday will be the next potential domestic currency drivers.
"If the job landscape doesn't look particularly good and we see some weakness in the housing sector, than I think the market will be more apt to sell Canadian dollar even further," said Darcy Browne, a managing director of capital markets trading at CIBC.
The Canadian dollar was weaker against most major currencies, with the yen a primary outlier. At one point, it touched its weakest level against the New Zealand dollar since mid-2005, but gained versus the British pound and Swiss franc.
"When you look at the movement of the Canadian dollar, Friday obviously, all the short-term guys bought dollars after the weak Canadian data. They were all squeezed out late in the day...the flight of the yen capital is finding its way to Canada as well," Browne said.
"There's a slight dislocation in the currency markets created by the yen crosses right now. Look for that to correct and we'll probably see a higher dollar overall versus Canada in the near term."
TD's Moore said the loonie would likely not move drastically until at least Wednesday, when the US Federal Reserve releases minutes from its last policy meeting that could provide hints to its changing view of monetary easing.
"If there was any talk of QE ending, that could bolster the hawkish view, that would be US dollar positive, risk asset negative," Moore said.
He expects the Canadian currency to struggle to push past C$1.01 and said it would also face resistance getting much above the low C$1.02s this week.
The price of Canadian government debt was lower across the curve, with the two-year bond down 2.5 Canadian cents to yield 0.992 percent and the benchmark 10-year bond slipped 14 Canadian cents to yield 1.767 percent.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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