The Canadian dollar hit its weakest level against the US dollar since October 1 after robust US jobs data eclipsed an election-enhanced jump in Canadian jobs, with soft oil prices and the Keystone pipeline rejection also weighing on the currency. Canada added 44,000 jobs in October, its biggest gain in five months, while the 271,000 rise in US nonfarm payrolls raised expectations of a December interest rate hike by the US Federal Reserve.
The Canadian data included an increase of 32,000 positions in the public administration sector, coinciding with temporary hiring related to the federal election. "I think there will be a correction in November," said David Watt, chief economist at HSBC. The Canadian dollar ended at C$1.3296 to the greenback, or 75.21 US cents, after having hit a five-week low at C$1.3318. That was much weaker than Thursday's close of C$1.3168, or 75.94 US cents and left the currency 1.7% lower on the week.
Moreover, the close above the October 28 peak at 1.3281 has shifted sights to September's 11-year peak at 1.3457. "As we approach the December rate decision by the Fed I think there is quite a strong possibility that we are going to see more Canadian dollar weakness," said Jennifer Lee, senior economist at BMO Capital Markets, adding that softer oil prices will also weigh on the currency. She also noted US President Barack Obama's rejection of the proposed Keystone XL oil pipeline, which could have helped boost Canadian crude exports and US dollar receipts for Canadian producers.
US crude oil prices settled at $44.29 a barrel, down 2.01 percent, while Brent crude fell 0.77 percent to $47.61 a barrel. Nonetheless, the Canadian dollar strengthened against other G7 currencies, registering a three-month high against the euro at C$1.4191 before trimming gains. Canadian government bond prices were lower across the maturity curve, with the two-year down 9 Canadian cents to yield 0.676 percent and the benchmark 10-year down 65 Canadian cents to yield 1.720 percent. The spread between the 2-year yield and the 10-year yield widened 2.4 basis points to 104.4 basis points, leaving the curve at its steepest since mid-September. The spread between yields on Canadian and US two-year bonds was little changed at -21 basis points, while the 10-year spread widened to -60.9 basis points.
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