The Canadian dollar was higher versus the US dollar on Friday morning but off its earlier highs as an initial boost after the release of US jobs data was reversed when the report was considered stronger than the headline suggested.
Canadian bond prices were higher across the curve as the jobs data supported the idea of more interest rate cuts by the US Federal Reserve. The Canadian currency was at C$1.0009 to the US dollar, or 99.91 US cents, up from C$1.0038 to the US dollar, or 99.62 US cents, at Thursday's close.
The Canadian dollar rallied to US $1.0070, valuing a US dollar at 99.30 Canadian cents, immediately after the US jobs data before turning back lower as investors digested the report. Nonfarm payrolls in the United States dropped 17,000 in January, below expectations for a rise of 80,000.
But the report also included a revision that put December's new-job total at 82,000 from 18,000. "People had been thinking if we get a negative on payrolls then just sell the (US) dollar and that had an initial impact but it wore off quickly," said David Watt, senior currency strategist at RBC Capital Markets.
"The sentiment lingering overall is going to be that this is still a sign that the US economy is slowing down but not as much as that initial shock value would indicate."
A recession in the United States would undoubtedly have a negative impact on Canada, which sends the bulk of its exports to the United States. The US data overshadowed a Canadian report that showed producer prices rose more than expected in December, while raw materials prices rose 0.2 percent, below the forecast 0.5 percent gain.
Overnight strength in the Canadian dollar, where it recouped some of the losses suffered during Thursday's session, was supported by a more stable stock market environment. Equities have been playing a key role in the Canadian dollar's direction all year given global growth concerns and the likely impact on Canadian exports.