TORONTO: The Canadian dollar halted a week of losses on Thursday to end moderately stronger against the greenback, with investors pausing before Friday's data on the North American labor market.
Earlier in the session, the Canadian dollar traded near its weakest level in 3-1/2 years as an unexpectedly dovish tone from the Bank of Canada reinforced a market view that interest rates will stay low for some time.
"Markets had gotten themselves - and probably still are - pretty long US dollars, and people are becoming increasingly bearish on Canada and the rate outlook," said Benjamin Reitzes, senior economist and foreign-exchange strategist at BMO Capital Markets.
"Maybe today's just a bit of profit-taking. I'm not entirely sure the trend is going to change here ... I still suspect we're moving higher (weaker) for the Canadian dollar." The Canadian dollar has retreated some 2 percent over the last three weeks, dropping through key support levels as investors turned bearish.
The Canadian dollar finished at C$1.0641 to the greenback, or 93.98 US cents, firmer than Wednesday's close of C$1.0678, or 93.65 US cents.
The loonie eased as much as C$1.0700 on Thursday, close to the C$1.0708 hit on Wednesday, which was the currency's weakest level since May 2010. The jobs data south of the border will be key in calibrating expectations for when the US Federal Reserve might start to wind down its economic stimulus.
"The market will be a bit wary about tomorrow's numbers," said Dean Popplewell, chief currency strategist at OANDA in Toronto. "Everybody is looking for some sort of indication whether a Fed taper will be introduced as early as this month.
"Investors are trying to gauge whether the Fed will start to reduce its $85 billion a month in bond purchases at its next meeting later in December, or hold off until next year.
Data on Friday is forecast to show Canada added 12,000 jobs in November, while the unemployment rate is seen holding at 6.9 percent. In the United States, the economy is expected to have created 180,000 jobs last month.
In a statement that showed the Bank of Canada is increasingly concerned about possible disinflation, the central bank on Wednesday said the risks of weak inflation now appear greater than they did six weeks ago.
Wednesday's statement was the first following a policy shift in October, when the central bank dropped any mention of a rate hike, catching markets off guard. Government bond prices were mostly lower across the maturity curve. The two-year bond was off 5 Canadian cents to yield 1.089 percent, while the benchmark 10-year bond fell 18 Canadian cents to yield 2.674 percent.
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